[HONG KONG] Starbucks has contacted private equity (PE) firms, technology companies and others as it considers options for its China business, including a possible stake sale, according to sources familiar with the matter.
The coffee chain sent out letters via a financial adviser to several potential investors this week to solicit views on the China business and how to grow it, the sources said, asking not to be identified because the process is private. A transaction could value the assets at several billion US dollars, the sources said.
Bloomberg News reported previously that Starbucks was assessing its operations in China, its second-biggest market. The company has warned of macroeconomic and competitive pressures in the country, where the likes of Luckin Coffee and Cotti Coffee have emerged as major homegrown players.
Starbucks, which had more than 7,750 stores in China as at the end of March, generated about US$740 million in net revenue in the country in the quarter to March. Luckin’s net revenue was US$1.2 billion in the same period.
Prospective bidders are expected to submit initial feedback in the next few weeks, the sources said. Starbucks may also decide not to do a deal, they said.
A representative for Starbucks said the company did not have any comment beyond what has already been shared publicly, referencing a late April earnings call by chief executive officer Brian Niccol, when he said there was evidence of progress in China following changes to product offerings and prices.
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“We remain committed to China for the long term,” Niccol said at the time. “We see great potential for our business there in the years ahead and remain open to how we achieve that growth.”
Niccol also said in October that Starbucks was exploring partnerships to help it over the long term, without elaborating.
Both McDonald’s and Yum! Brands, the parent of KFC, sold stakes in their China operations to PE firms to tap growth and better cater to local tastes. In 2023, McDonald’s agreed to buy back Carlyle Group’s minority stake in a partnership that runs the chain’s business in China, Hong Kong and Macau.
Starbucks shares are down 25 per cent from a Feb 28 peak. BLOOMBERG
