Starbucks Corporation is reportedly evaluating strategic options for its China operations, including the possibility of forging local partnerships or a partial divestment, as the company seeks to revitalise growth in its second-largest global market.
Speaking to Chinese media outlet Jiemian News on Tuesday, the Seattle-based coffee chain affirmed its continued commitment to the Chinese market, stating it is “evaluating the best ways to capture future growth opportunities”. Starbucks added that its priority remains focused on reinvigorating business momentum and sustaining long-term success in the region.
The remarks followed reports that several major investment firms — including Hillhouse Capital, Carlyle Group and CITIC Capital — recently participated in a reverse management roadshow related to Starbucks China. While the final structure of any potential deal remains undetermined, the business unit is estimated to be valued between $5 billion and $6 billion. Starbucks’ current global market capitalisation stands at $104.93 billion.
In recent years, Starbucks has witnessed a steady erosion of its market dominance in China’s on-premises coffee segment. Local coffee chains have gained considerable ground, while freshly made tea beverages have surged in popularity, particularly among younger consumers. According to data from Euromonitor International, Starbucks’ share of the specialist coffee and tea shop market in China has declined sharply, from a peak of 41 percent in 2017 to just 14 percent in 2024. Notably, the overall market expanded from $8.33 billion in 2019 to $21.8 billion in 2024.
Starbucks’ fiscal second-quarter results showed flat comparable store sales in China. A 4 percent increase in transaction volume was offset by a corresponding 4 percent drop in average ticket size.
Nevertheless, the company remains optimistic about its long-term outlook in China. In April, Starbucks Chairman and CEO Brian Niccol pointed to early signs of recovery driven by new product strategies, including the introduction of sugar-free offerings and more competitive price points. He also confirmed that Starbucks was open to exploring strategic partnerships to support its future in the market.
In a bid to strengthen its position, Starbucks earlier this month cut prices on a range of non-coffee beverages. Items such as Frappuccinos, iced shaken teas and tea lattes saw average reductions of 5 yuan (£0.55), with some drinks now priced as low as 23 yuan (£2.55), and further discounts available during promotional campaigns. The pricing strategy forms part of Starbucks’ “all-day beverage” initiative, which aims to align coffee consumption with morning routines and tea-based drinks with afternoon preferences.
The company currently operates more than 7,700 stores across China but is facing intensifying competition from fast-growing domestic players. Luckin Coffee now leads the field with over 24,000 outlets, while newer entrant Cotti Coffee has expanded rapidly to approximately 14,000 stores.
Additionally, the rise of freshly made tea brands continues to fragment the beverage landscape, adding further pressure on Starbucks’ traditional dominance.
Industry comparisons have been drawn to McDonald’s China, which has thrived under localised ownership following CITIC Group and CITIC Capital’s acquisition of a controlling stake in 2017. McDonald’s China has since more than doubled its footprint to over 6,820 locations as of 2024 and plans to open nearly 1,000 of its 2,200 new stores globally in China next year.
Independent food and beverage analyst Zhu Danpeng commented that CITIC could serve as an ideal strategic partner for Starbucks. “If we consider overall business synergy and success rate of operations, selling to CITIC would be the best choice,” Zhu stated. “With McDonald’s China already under its umbrella, CITIC has more resources, deeper experience and a stronger grasp of the Chinese consumer market. A Starbucks-CITIC tie-up would unlock clear strategic advantages.”
-China Daily
