"Boyu promises be instrumental in helping Starbucks open stores in cities beyond Shanghai, Beijing and China's other megalopolises, while keeping costs in check. "Boyu's deep local knowledge and expertise will help accelerate our growth in China, especially as we expand into smaller cities and new regions," Starbucks CEO Brian Niccol said in a statement announcing the deal on Monday. Starbucks currently has 8,000 stores in China, and Niccol said that could grow to 20,000 under the new arrangement."
"The deal is also meant to better equip the brand to compete with Luckin, a Chinese chain with more than 20,000 franchise locations that has lured its U.S. rival into price wars. Though Starbucks was early to the China coffee shop market, its market share there had plunged to 14% by last year, from 34% in 2019, Reuters reported (citing data from Euromonitor International)."
Starbucks is selling a 60% stake in its China retail operations to Hong Kong-based Boyu Capital for about $4 billion. Boyu will support expansion beyond major metropolises, target smaller cities, and help control costs. Starbucks currently operates 8,000 stores in China with potential to reach 20,000 under the new arrangement. Competitive pressure from Luckin Coffee and pandemic-related store closures eroded Starbucks' momentum and market share, which fell from 34% in 2019 to 14% by last year. The transaction aims to improve local execution and better position the brand in a challenging Chinese market.
Read at Fortune
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