Seeking Investor Feedback... Submissions Expected Within Weeks
Losing Ground to Low-Priced Local Coffee Brands in China
Bloomberg reported on May 15 that Starbucks, which has been losing ground to local Chinese brands offering low-priced coffee, is considering various options for its China business, including a potential stake sale, and is in contact with private equity firms and technology companies.
According to sources, Starbucks sent a confidential letter this week through its financial advisors to several potential investors, seeking their opinions on its China business and growth strategies. The sources added that if a deal is reached, the assets could be valued at several billion dollars.
The sources also said that preliminary bidders are expected to submit initial feedback in the coming weeks. They noted that it is still possible that Starbucks may ultimately decide not to proceed with a sale.
Bloomberg had previously reported that Starbucks was assessing its China business.
As of the end of the first quarter, Starbucks operated more than 7,750 stores in China and recorded net sales of $740 million (approximately 1.031 trillion won). China is Starbucks' second-largest market. However, competition has intensified as local Chinese coffee chains such as Luckin Coffee and Cotti Coffee, which emphasize low prices, have risen in prominence. During the same period, Luckin Coffee operated about 24,000 stores in China and posted net sales of $1.2 billion.
In the past, McDonald's and Yum Brands, the parent company of KFC, also sold stakes in their China businesses to private equity firms to better cater to local consumer preferences and drive growth. In 2023, McDonald's agreed to buy back a minority stake in its China, Hong Kong, and Macau joint venture that was previously held by the Carlyle Group.
Starbucks stated that it has nothing further to add beyond what has already been publicly disclosed. Brian Niccol, CEO of Starbucks, said during last month's earnings announcement, "We remain committed to the China market for the long term," and added, "Over the next few years, our China business has significant potential, and we are open to ways to achieve growth."
Starbucks' share price has fallen 25% from its peak on February 28.
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