Starbucks to sell majority stake in China business to Boyu Capital

Starbucks has agreed to sell a majority stake in its China business to private equity group Boyu Capital to form a joint venture valued at $4bn, as it aims to more than double its number of cafés in the country.

The coffee shop chain on Monday said Hong Kong-based Boyu would hold an up to 60 per cent interest in its 8,000 stores in China, while Starbucks would have a 40 per cent stake and continue to own the Starbucks brand. The US company would license the brand and intellectual property to the new joint venture, it said.

Starbucks has for months been sounding out investors to sell a stake in the China business, its second-largest after the US with $3bn in net revenue during fiscal 2024.

After arriving in mainland China in 1999, Starbucks’ rapid expansion helped introduce coffee culture to the country.

But the business has slowed recently amid pandemic-era lockdowns, an economic deceleration and the rise of more affordable local competitors. Tougher competition led Starbucks to cut prices on some drinks this past summer.

As it evaluated offers from five bidders last month, Boyu and US-based private equity group Carlyle emerged as the leading contenders, the Financial Times reported last month.

Starbucks said the total value of its China retail business would be more than $13bn, which includes proceeds from the sale to Boyu, the value of its retained interest in their joint venture and the future value of licensing payments.

Starbucks aims to expand to as many as 20,000 stores in China — a number that would top its current store count in North America.

Brian Niccol, chief executive of Starbucks, said: “Boyu’s deep local knowledge and expertise will help accelerate our growth in China, especially as we expand into smaller cities and new regions. We’ve found a partner who shares our commitment to a great partner experience and world class customer service.”

Starbucks said Boyu would acquire its interest in the venture “based on a cash-free, debt-free enterprise value of approximately $4bn”.

Among the other investors that submitted bids for a stake in the China business were Neil Shen’s HongShan Capital Group, Primavera Capital and FountainVest, the FT previously reported.

After sharp declines in sales earlier this year, Starbucks’ China business has more recently stabilised. Comparable store sales rose 2 per cent year on year in the quarter that ended in September, with a 9 per cent increase in transactions partly offset by a 7 per cent decline in the average amount spent.

This article has been amended to reflect that Starbucks and Boyu will be forming a joint venture valued at $4bn, and not Starbucks selling a majority stake to Boyu for $4bn