It looks like Starbucks may be taking a step back in China. The coffee giant said 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.
“We aim to bring the Starbucks experience to more customers in more cities across China. We see a path to grow from today’s 8,000 Starbucks coffeehouses to more than 20,000 over time,” Starbucks CEO Brian Niccol said in a statement.
Starbucks 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 ($1.4) – less than a third of Starbucks’ prices.
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Boyu Capital is a Hong Kong-based private equity and alternative asset management firm, with offices in Beijing, Shanghai, and Singapore. The firm focuses on investments in Greater China, targeting sectors such as consumer, retail, technology, healthcare, media, and financial services. Boyu emphasizes long-term, theme-driven strategies and typically acquires significant stakes in companies; in some cases, these stakes are controlling, though the exact level of control varies by deal. The firm was founded around 2010–2011, as sources differ slightly on the exact year.
According to 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.
“Boyu is obviously not like Citic, which is a state-owned enterprise with a very strong supply chain advantage in China in terms of real estate, in terms of land,” said Jason Yu, general manager at CTR Market Research.
“Boyu is more of a private equity firm, they are probably going to provide more strategic support to Starbucks and also help them with relationships and digital partnerships,” he said.
Boyu will help open more Starbucks stores in lower-tier cities and make existing stores more cost efficient, according to a person with knowledge of the investment firm’s plans who declined to be identified.
By selling a majority stake in its China operations to a private equity firm, Starbucks appears to be balancing the need for rapid expansion with the challenges of maintaining profitability in a highly competitive and cost-sensitive market. Local competitors, such as Luckin and Cotti, offer significantly lower prices, putting pressure on Starbucks to adapt its operations, optimize costs, and reach a broader consumer base.
Partnering with Boyu Capital allows Starbucks to leverage local expertise, strategic guidance, and capital infusion without relinquishing control of its brand or intellectual property. The joint venture structure, with Starbucks retaining a 40% stake, ensures that the company continues to influence brand standards and customer experience while benefiting from Boyu’s knowledge of the Chinese market. This approach also signals a growing trend among global consumer brands to collaborate with private equity or local partners to navigate regulatory complexities and regional nuances.
Overall, the move highlights Starbucks’ long-term commitment to China, emphasizing growth in lower-tier cities, digital innovation, and operational efficiency. It reflects a pragmatic strategy to sustain competitiveness, manage costs, and scale effectively in a dynamic and evolving market.