Major private equity firms and industry players are understood to have expressed takeover interest in Starbucks China in a deal that could potentially value the entity at up to US$10 billion.
After Starbucks formally launched the sale process in May, the Seattle-based company is now sifting through proposals from 30 interested domestic and foreign firms including Centurium Capital which holds a stake in Starbucks' competitor in China, Luckin Coffee, and Hillhouse Capital along with global peers Carlyle Group and KKR.
It’s understood that bids so far value the business between $5 billion and $10 billion, with expectations that final offers will land closer to the higher end.
A shortlist of potential investors that will progress to the next round of bidding is expected to be finalised within two months. However, the entire deal might not close before the end of the year.
The bidding process marks a watershed moment for private equity firms trying to get a toehold into China’s consumer growth story, with Starbucks’ local arm regarded as a strategic gateway into one of the world’s largest coffee markets.
However, Starbucks' recent track-record in China is not encouraging.
After losing ground to lower-priced local rivals like Luckin Coffee and Cotti Coffee, Starbucks has been exploring a number of turnaround options including strategic partnerships and joint ventures. However, it is not currently considering a full sale of the local unit.
Euromonitor says the company’s market share plunged from 34% in 2019 to 14% in 2024 with local brands like Luckin Coffee and bubble tea chains continuing to win over customers.
In an attempt to recover lost market share, Starbucks recently cut prices on more than 20 drinks and launched sugar-free options to appeal to health-conscious consumers.
"We are looking for a strategic partner with like-minded values, who shares our vision to provide a premium coffeehouse experience,” a Starbucks spokesperson told the media.
“We remain committed to China and want to retain a meaningful stake in the business.”
Starbucks told the media it would most likely retain a 30% stake, with the remainder split among a group of buyers, each holding less than 30%.
According to its 2024 annual filing, Starbucks, which operates 7,594 stores in China - its second-largest region - sales were flat compared to a year ago, pausing four straight quarters of declines.
While CEO Brian Niccol recently told the market there’s potential for Starbucks to have as many as 20,000 locations in China, analysts warn that rising rental costs, growing competition, and shifting consumer preferences could be major hurdles going forward.
