Starbucks to sell control of China business to Boyu, aims for rapid growth

Starbucks said on Monday (November 3) that it would sell control of its operations in China to Boyu Capital in a deal that values the business at $4 billion - one of the largest divestments of a China unit by a global consumer company in recent years.

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Starbucks is teaming up with Boyu to grow in China, where cheaper local rivals are gaining ground.
Boyu will hold 60% of the new joint venture while Starbucks retains 40% and licenses its brand.
The deal values Starbucks' China retail business at over $13 billion, despite its shrinking market share.

The Seattle-based coffee chain said the funds from investment firm Boyu will help it jump-start growth in the world's second-largest economy, where local rivals like Luckin and Cotti now offer lattes for 9.9 yuan (US$1.40) - less than a third of Starbucks' prices.

Under the deal, Boyu - whose founders include the grandson of former Chinese President Jiang Zemin - will hold up to 60% of a new joint venture. Starbucks will hold 40% and will continue to license the brand and intellectual property to the venture.

The U.S. firm said the value of the retail business in mainland China - including proceeds from the sale, the value of its retained stake and likely licensing income over at least the next 10 years - will total more than US$13 billion. Its shares climbed 3% in after-hours trading.

Starbucks has been credited with creating the market for coffee in China after entering in 1999. But its market share there has tumbled to 14% last year from 34% in 2019, according to data from Euromonitor International.