Starbucks forms joint venture to manage its business in China

Starbucks It announced Monday that it is forming a joint venture with Boyu Capital to operate the company’s locations in China.

Under the terms of the deal, Boyu, an alternative asset management firm, will pay Starbucks approximately $4 billion to retain a stake of up to 60% in the joint venture. Starbucks will own a 40% stake and maintain its ability to license the brand and intellectual property to the joint venture.

The announcement comes after the coffee giant conducted a months-long review of options that included strategic partnerships. Starbucks values ​​its business in China at more than $13 billion, the company said. The valuation includes the sale of the controlling interest in the joint venture, as well as the value of the retained interests and ongoing license fees that will be paid to the company in the future.

The transaction is expected to close in the second quarter of fiscal 2026, pending regulatory approval.

Starbucks opened its first store in China in 1999. By 2015, it had grown to become the company’s second-largest market, behind only the United States.

“Building on our positive business momentum, our partnership with Boyu will enable Starbucks China to fully unleash its vast market opportunities,” Molly Liu, CEO of Starbucks China, said in a statement.

Today, the company has nearly 8,000 locations in China, but Starbucks has big ambitions in the market. CEO Brian Nicol told CNBC’s Kate Rogers in September that the country may one day have 20,000 or even 30,000 locations nationwide.

But in recent years, Starbucks’ sales in China have seen a sharp decline, first due to the epidemic and related government restrictions, and later due to increasing competition. Rival Luckin Coffee now has more stores in China than Starbucks, and has attracted customers with cheaper drinks than the US coffee chain.

The company announced Wednesday that same-store sales in its fiscal fourth quarter in China increased 2%, driven by a 9% increase in traffic. However, as Starbucks tends to discounts to compete with local rivals, the average ticket price at its Chinese cafes has declined, impacting the company’s profits.

While Starbucks executives have consistently expressed optimism about the company’s long-term prospects in China, its poor performance in the country has weighed on Starbucks’ overall financial results.

For decades, China’s large population and rapidly growing economy have made it an attractive market for American companies. But in recent years, the economic slowdown and increased competition from local brands have made some companies rethink their strategies.

Earlier this year, parent company Burger King International restaurant brands TFI Asia Holdings has bought its struggling China business with the aim of selling it to another operator. On the other hand, McDonald’s It increased its minority stake in its China business from 20% to 48% two years ago, aiming to capitalize on market growth.