According to Bloomberg, Starbucks Corporation is exploring options for its business in China, including the possibility of selling stakes in the business. China is Starbucks’ second-largest market after the United States. In recent years, the company has faced intense competition from local brands and other foreign brands in China, especially from Luckin Coffee, which has been gaining market share at Starbucks’ expense.
Insiders revealed that Starbucks has informally assessed the interest of potential investors, including domestic private equity firms. They requested anonymity as this information is considered confidential. Some insiders mentioned that selling stakes could also attract interest from Chinese corporate groups or other local companies with experience in the industry. Starbucks is still evaluating its options and has not made a final decision on whether to proceed.
Starbucks is under pressure from activist investor Elliott Investment Management, which has pushed for a reevaluation of its China business. In recent years, McDonald’s and Yum! Brands divested their China businesses by selling stakes to private equity firms. Elliott has become one of Starbucks’ largest investors.
Starbucks’s new CEO, Brian Niccol, said last month that he is working to better understand the company’s China business, noting that the competitive environment seems “extreme” and the macro environment is “challenging.” A Starbucks spokesperson responded to Bloomberg’s inquiries this week, stating, “We are fully committed to our business and partners, as well as growth in China. We are working to find the best path for growth, including exploring strategic partnerships.”
Starbucks China’s same-store sales declined by 14% last quarter. Over the past year, Starbucks stock has underperformed, accumulating a 2.77% decline.