Starbucks Cedes Control in China, Selling Majority Stake to Boy-u Capital in a $4 Billion Deal

ERBIL (Kurdistan24) – In a landmark strategic shift that underscores the immense challenges and evolving realities of the world's second-largest consumer market, the global coffee giant Starbucks announced on Monday that it will sell a controlling stake in its vast Chinese retail operations to the private equity firm Boyu Capital.

The deal, which values the business at approximately $4 billion, will see the Seattle-based company hand over up to 60 percent of its nearly 8,000 stores in China to a new joint venture, a move that signals a significant recalibration of its decades-long strategy in a country where it once enjoyed unrivaled dominance but now faces fierce competition from a new wave of nimble and aggressive local rivals.

The agreement, as reported by The New York Times and Agence France-Presse (AFP), represents a pragmatic acknowledgment by Starbucks that its future growth in China, particularly its ambition to expand into smaller cities and new regions, requires the deep local market expertise and connections that a powerful domestic partner like Boyu Capital can provide.

While Starbucks will retain a 40 percent stake in the new entity and continue to own and license its iconic brand and intellectual property, the deal marks a fundamental change in the operational control of what has been, for more than two decades, one of the company's most important and fastest-growing international markets.

Starbucks has been a significant and pioneering presence in China for over a quarter of a century. The company opened its first shop in the country in 1999, a time when a deeply entrenched tea culture dominated and a widespread appreciation for coffee was, as The New York Times noted, "practically nonexistent."

However, as China's middle class grew exponentially and developed a taste for international brands as a signal of its newfound wealth and status, Starbucks flourished.

The familiar green siren became a ubiquitous symbol of modern, aspirational urban life, and China grew to become the company's second-largest market globally, accounting for about 8 percent of its total revenue. As of the end of June, Starbucks operated a staggering 7,828 stores across China, a testament to its massive and successful investment in the market.

In recent years, however, the landscape has shifted dramatically. A new generation of Chinese consumers has become more cost-conscious and increasingly curious about, and loyal to, local brands. This has created a fertile ground for a host of domestic coffee and tea chains like Luckin Coffee, ChaGee, and HeyTea to flood the market.

These rivals have successfully won over customers with lower prices, aggressive promotions, and a menu tailored to local tastes, offering everything from coconut milk lattes to boba milk teas with cheese cream and sugary jasmine tea frappés.

For Starbucks, which has steadfastly resisted engaging in a price war on its core products, the impact has been significant. The company has seen its same-store sales weaken over the last couple of years, and its once-commanding share of the overall Chinese coffee market has eroded.

While Starbucks reported last week that its latest quarterly same-store sales in China had increased by a modest two percent, fueled by an increase in foot traffic, it also had to concede that the average spending per customer had dropped, a clear sign of the competitive pressure on pricing.

The new partnership with Boyu Capital, a prominent private equity firm with offices in Singapore, Shanghai, Hong Kong, and Beijing, is a direct response to this new reality.

Starbucks CEO Brian Niccol, who has spent much of his first year at the helm trying to bolster the chain's business in its primary U.S. market, acknowledged last year that the company needed to "figure out how we grow in the market now and into the future" in China, and hinted that this growth could come with the help of a strategic partner.

The joint venture is the realization of that strategy. In a statement, Niccol framed the deal as a combination of mutual strengths.

"This approach allows us to combine the strength of the Starbucks brand, our coffee expertise, the third place, and our unique partner culture with Boyu’s deep knowledge of the China market and local expertise," he said. 

He added, as reported by AFP, that "Boyu's deep local knowledge and expertise will help accelerate our growth in China, especially as we expand into smaller cities and new regions."

The ambition for this new partnership is vast.

The companies have stated that they aim to eventually grow the store count to as many as 20,000 locations over time, a massive expansion that will rely heavily on Boyu's ability to navigate the complex real estate and consumer landscapes of China's smaller, but rapidly growing, urban centers. The business will continue to be headquartered in Shanghai.

Despite ceding majority control, Starbucks has projected a significant long-term financial upside from the deal.

The company said it expects the total value of its China retail business to exceed $13 billion over the next decade. This figure includes the immediate proceeds from the $4 billion sale, the value of its retained 40 percent interest in the joint venture, and the expected value of future licensing fees.

The deal, which is expected to close in the second quarter of fiscal year 2026 pending regulatory approvals, comes at a challenging time for Starbucks globally.

As reported by The New York Times, the company's stock has fallen 17 percent in the past year.

In late September, it abruptly announced the layoffs of 900 corporate staff and the closure of more than 600 underperforming stores. Last month, while its global revenue saw a modest rise, its net income dropped by a staggering 85 percent.

The decision to bring in a powerful local partner in China is a clear and decisive move to shore up one of its most critical international markets and to chart a new path for growth in an increasingly competitive and complex new era.