starbucks 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 valued at $4 billion, Boyu, an alternative asset management company, will have up to a 60% stake in the joint venture. Starbucks will hold a 40% stake and maintain its ability to license brands and intellectual property to the joint venture.
The announcement comes after the coffee giant carried out 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 majority interest in the joint venture, combined with the value of both its retained interest and the ongoing license fees that will be paid to the company in the future.
The deal 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 unlock the huge market opportunity,” Molly Liu, CEO of Starbucks China, said in a statement.
Today, the company has approximately 8,000 locations in China, but Starbucks has big ambitions for the market. CEO Brian Niccol told CNBC’s Kate Rogers in September that the country could one day have 20,000 or even 30,000 locations nationwide.
But in recent years, Starbucks has seen its sales in China decline, first due to the pandemic and related government restrictions and then due to increased competition. Rival Luckin Coffee now has more stores in China than Starbucks and has won over customers with lower-priced drinks than the American coffee chain.
On Wednesday, the company reported that its fiscal fourth-quarter same-store sales in China rose 2%, driven by a 9% increase in traffic. However, as Starbucks has leaned toward discounts to compete with local rivals, the average ticket at its Chinese coffees has fallen, weighing on the company’s profits.
While Starbucks executives have continually expressed optimism about the company’s long-term prospects in China, its weak performance in the country has weighed on Starbucks’ overall financial results.
For decades, China’s huge population and fast-growing economy have made it an attractive market for American companies. But in recent years, an economic slowdown and increased competition from local brands have caused some companies to reconsider their strategies.
Earlier this year, Burger King’s parent company International Restaurant Brands bought its struggling business in China from TFI Asia Holdings with the aim of selling it to another operator. On the other hand, McDonald’s increased its minority stake in its China business from 20% to 48% two years ago, aiming to benefit from market growth.
