Starbucks Restructures China Operations With Boyu Capital in $4 Billion Deal

Starbucks and Boyu Capital have signed a deal where Boyu will own up to 60% of the new joint venture.

Starbucks has announced plans to sell its operations in China to Boyu Capital in an agreement that values the business at $4 billion. It is one of the largest exits of a Chinese unit by an international consumer brand in recent years.

The Seattle-based coffee giant said that the investment it is going to receive from Boyu Capital will help the company grow in China, the world’s second-largest economy. It is especially a crucial move, as its competitors, such as Luckin and Cotti, are selling lattes for just 9.9 yuan ($ 1.40), which is less than one-third of what Starbucks would normally charge for its latte.

But some analysts have a different opinion. Starbucks was founded and is known for its goal, which was to create a common place to meet and spend time. They advise that instead of making the mistake of entering an aggressive price war with its competitors, like Luckin, they should focus on their traditional strength as a coffee chain.

Starbucks Chief Executive Officer (CEO) Brian Niccol stated that they aim to bring the Starbucks flavour experience of premium coffee to more customers in more cities across China. They see this as an opportunity to grow from 8000 stores, which they have, to more than 20,000 in the future.

Starbucks and Boyu Capital have signed a deal where Boyu will own up to 60% of the new joint venture. Starbucks will retain a 40% share and continue to license its brand and intellectual property from the venture. The founders of Boyu include the grandson of the former President of China, Jiang Zemin.

The US company stated that it expects the value of its retained business in mainland China, which includes proceeds from the sale, the value of the retained stake, and likely licensing income it will earn over at least the next 10 years, to be valued at more than $13 billion. After the announcement, the shares of the retail business rose 3% after-hours trading.

The US retail coffee chain entered China in 1999; since then, it has been credited with creating the market for coffee in China. However, its market share has dropped from 34% in 2019 to 14% in 2024, according to data from Euromonitor International.

Luckin, known for its takeaway and delivery model, now has more than 20,000 franchise stores across China. They have recently opened two stores in New York, a market where Starbucks is well-established.

As the coffee chain faces increased competition, the company has reduced the prices it charges for some of its non-coffee drinks and introduced new drinks and foods tailored for the local market to better compete. Same-store sales in China increased 2% in the quarter that ended on June 29, after having zero growth in the previous quarter.

Boyu, with the deal, is expected to open more Starbucks stores in lower-tier cities in China and improve some of the existing stores, making them more cost-efficient, according to people with knowledge of the plans who do not want to be identified.

Many other global chain companies have taken a similar approach in China. For example, in 2017, McDonald‘s sold almost 80% of its China and Hong Kong business to investors such as Citic for $2.1 billion. It was a move that was considered successful.

Citic was a state-owned company with a strong real estate presence, while Boyu is a private equity company. Jason Yu, general manager at CTR Market Research, claimed that Boyu will help Starbucks with strategic support as well as help with partnerships and digital projects.