Starbucks Sells 60% Stake in China Unit. Investors Wait for Real Improvement.

Starbucks has approximately 8,000 stores in China. (Kevin Frayer/Getty Images)

Starbucks is selling a majority stake in its China unit to private-equity firm Boyu Capital as it tries to accelerate growth in the country amid fierce competition from local rivals.

Under the joint-venture agreement announced on Monday, Boyu will own up to 60% of Starbucks’ China retail operations, while Starbucks will keep 40% and continue to own the brand and intellectual property.

Boyu will acquire its interest based on a cash free, debt free enterprise value of approximately $4 billion for Starbucks’ entire China business.

Starbucks expects the total value of its China retail business to exceed $13 billion, counting upfront proceeds from the sale, its remaining stake, and licensing income over time.

The market shrugged off the news as it has long been expected Starbucks would sell some of its stake in China to a local partner. Investors might be waiting to see real improvement. Starbucks shares were up 0.3% in after-hours trading Monday.

Starbucks has approximately 8,000 stores in China today. Under the new partnership, the two companies plan to expand aggressively to reach up to 20,000 stores eventually.

Starbucks CEO Brian Niccol said the partnership brings together the company’s global coffee brand and culture with Boyu’s local Chinese market know-how, which could help it accelerate growth into smaller cities and new regions in the country.

The joint venture is expected to close in the second quarter of Starbucks’ fiscal year 2026 that ends next September, after regulatory approvals.

Although China has long been one of Starbucks’ key growth markets, things haven’t been smooth lately. In the quarter ended December 2024, Starbucks’ China business reported a 6% drop in same-store sales as transaction volume and average order prices both declined.

As Chinese consumers become more price-sensitive, the premium cafe experience Starbucks pioneered is losing some of its edge. Local competitors such as Luckin Coffee are offering cheaper drinks and more locations in smaller cities, challenging Starbucks’ premium positioning.

Starbucks has been rethinking its strategy in China, leaning into local-flavour drinks, more flexible store formats, and lower prices. Things have been improving this year. In the latest quarter ended in September, same-store sales in China improved 2% from a year ago. Although average order prices shrunk, it was more than offset by the increase in transactions.

The new joint venture with Boyu could help the company adapt more quickly to local competition and changing consumer demands in the future.

Corrections & Amplifications: Starbucks’ China business is valued at about $4 billion. A previous version of this article incorrectly said a 60% stake in Starbucks’ China unit is being sold to Boyu Capital for $4 billion.

Write to Evie Liu at evie.liu@barrons.com