starbucks announced on Monday that it will form a joint venture with Boyu Capital to operate the company’s locations in China.
Under the terms of the $4 billion deal, alternative asset management firm Boyu will own up to a 60% interest in the joint venture. Starbucks will retain a 40% stake and maintain the ability to license its brand and intellectual property to the joint venture.
The announcement comes after the coffee giant spent months considering options, including strategic partnerships. Starbucks values its China operations at more than $13 billion, the company said. The valuation includes the value of both the sale of a controlling interest in the joint venture and its retained interest and ongoing license fees payable to the company in the future.
The transaction is expected to close in the second quarter of fiscal 2026, subject to regulatory approvals.
Starbucks opened its first store in China in 1999. By 2015, China had become the company’s second-largest market after the United States.
“Building on our strong business momentum, our partnership with Boyu will allow Starbucks China to fully unlock vast market opportunities,” Molly Liu, CEO of Starbucks China, said in a statement.
The company currently has about 8,000 stores in China, but Starbucks has big ambitions for the market. CEO Brian Nicol told CNBC’s Kate Rogers in September that the company could one day have 20,000 or even 30,000 locations across the country.
But in recent years, Starbucks’ sales in China have plummeted. That was first due to the pandemic and related government regulations, and then due to increased competition. Rival Luckin Coffee now has more stores in China than Starbucks and lures customers with lower-priced drinks than the U.S. coffee chain.
On Wednesday, the company reported that same-store sales in China increased 2% in the fourth quarter, driven by a 9% increase in store foot traffic. But as Starbucks leans toward discounts to compete with local rivals, average admission tickets at Chinese cafes have fallen, weighing on the company’s profits.
While Starbucks executives remain optimistic about the company’s long-term prospects in China, poor performance there is weighing on Starbucks’ overall financials.
For decades, China’s huge population and fast-growing economy have made it an attractive market for American companies. But in recent years, a slowing economy and increased competition from domestic brands have caused some companies to reconsider their strategies.
Earlier this year, Burger King’s parent company restaurant brand international acquired its struggling China business from TFI Asia Holdings with the intention of selling it to another operator. on the other hand, mcdonalds raised its minority stake in its China operations from 20% to 48% two years ago as it aims to benefit from market growth.
