Starbucks Transfers Control of China Business to Boyu Capital

Starbucks announced on November 3 that it will sell control of its China business to investment firm Boyu Capital in a deal valued at $4 bn, marking one of the largest divestments by a global consumer brand in China in recent years.

Boyu to Take 60% Stake in Joint Venture

Under the agreement, Starbucks and Boyu Capital will form a joint venture in which Boyu will hold up to 60% of Starbucks’ retail operations in China. Starbucks will keep a 40% stake and continue to own and license its brand and intellectual property to the new entity, the companies confirmed.

The Seattle-based coffee chain has seen its dominance in China slip over recent years as homegrown competitors such as Luckin Coffee and Cotti Coffee attract customers with lower prices. Facing an economic slowdown and increasingly price-sensitive consumers, Starbucks has struggled to remain competitive without cutting prices too sharply.

The company said that proceeds from the deal, combined with its retained share and future licensing income over the next decade, are expected to exceed $13 bn. Shares in Starbucks rose roughly 3% in after-hours trading following the announcement.

Market Share Falls as Local Rivals Surge

Starbucks was the pioneer of China’s modern coffee culture when it entered the market in 1999. However, its market share has dropped dramatically from 34% in 2019 to 14% in 2024, according to Euromonitor International. To counter the decline, the chain has introduced more localised products and reduced prices for select non-coffee items.

Analysts note that while a price war with cheaper rivals like Luckin would be unwise, Starbucks should instead reinforce its traditional identity as a social meeting spot. Luckin, which now operates over 20,000 outlets nationwide, has overtaken Starbucks’ 7,800 stores, focusing primarily on takeaway and delivery services.

Despite headwinds, Starbucks’ same-store sales in China grew 2% in the quarter ending June 29, up from no growth in the previous quarter.

Rising Risks Amid US-China Tensions

In its 2024 annual report, Starbucks highlighted risks linked to escalating tensions between the US and China, warning of potential tariffs, boycotts and political sensitivities.

The deal concludes more than a year of strategic planning, first hinted at by former CEO Laxman Narasimhan, who said the company was exploring partnerships to strengthen its foothold in China.

Starbucks is not the first major global brand to restructure its Chinese operations. McDonald’s previously sold a controlling interest in its China and Hong Kong business to investors including Citic, a partnership widely viewed as successful.

Founded in 2010 by Alvin Jiang, grandson of former Chinese President Jiang Zemin, Boyu Capital is based in Hong Kong and focuses on investments in consumer and retail, finance, healthcare and technology sectors.

Kursiv also reports that last year Starbucks Corporation registered its trademark in Uzbekistan.