What the Starbucks China stake sale means for the china coffee market

Starbucks has finished an initial screening of investors for a stake in its China business, moving roughly dozens of candidates to a second round, Bloomberg reported. The list includes private equity firms such as Boyu Capital, Carlyle, EQT, KKR, Hillhouse and Primavera, plus two unexpected Chinese tech names, JD.com and Tencent.

Shortlisted parties will get access to Starbucks' China financial data and prepare bids in the coming months. CEO Niccol said more than 20 interested parties emerged, and the company wants to keep a sizable share of the business. The aim is local market experience and supply chain reach, not just capital, as competition in the china coffee market keeps intensifying.

New developments have emerged regarding the sale of a stake in Starbucks' China business. According to Bloomberg, Starbucks has completed an initial screening of potential investors, with roughly dozens of institutions advancing to the second round of candidates. The list includes not only well-known private equity giants such as Boyu Capital, Carlyle Group, KKR, and Hillhouse Capital, but also unexpectedly two Chinese tech companies, JD.com and Tencent. Starbucks CEO Niccol previously revealed on an earnings call that more than 20 interested parties have expressed interest, and emphasized that the company still hopes to retain a considerable proportion of equity in its China business. The core consideration in finding a partner is not capital, but how to position the Starbucks brand more favorably in the future.

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Not long after the latest quarterly earnings report was released, new developments have emerged around the sale of Starbucks' China business. According to the latest report from Bloomberg News, Starbucks has completed an initial screening of potential investors for its China business, with roughly dozens of institutions—including private equity firms and tech companies—advancing to the second round of candidates.

According to people familiar with the matter, the candidate list includes private equity institutions such as Boyu Capital, Carlyle Group, EQT AB, FountainVest Partners, KKR, Hillhouse Capital, and Primavera Capital. What surprised the outside world even more was the addition of two Chinese tech companies to the list—JD.com Group and Tencent Holdings Limited.

The report, citing people familiar with the matter, said the companies on the list will gain access to Starbucks' financial data in China so they can conduct evaluations and prepare bids in the coming months. The people also said that an injection of new capital and richer local market experience could help Starbucks expand its store network, further improve its supply chain system in China, and strengthen its action platform and brand strategy for Chinese consumers.

During a recent earnings call with analysts, Starbucks CEO Niccol stated that the company would seek a partner in the Chinese market, and revealed that more than 20 interested parties have already shown strong interest, with the brand evaluating various options.

As for the criteria for screening these more than 20 candidates, Niccol set out two conditions: first, they must share Starbucks' mission and values; second, they must be an ideal partner capable of achieving more efficient operations in the local market. In addition, Niccol emphasized that Starbucks still hopes to "retain a considerable proportion of equity" in its China business in the future, and pointed out that finding a partner in China is "not about capital," but "about how we ensure the Starbucks brand is in a more favorable position in the future."

Judging from Starbucks' published financial reports, China is the second-largest market for the Seattle-based coffee chain brand, but in recent years Starbucks has been left behind by local competitors such as Luckin, and its performance report card has not been ideal.

In order to turn around its situation in the Chinese market, Starbucks began to follow its rivals by introducing fruit teas, fruit coffees, and "true flavor sugar-free" products to its menu; it proactively lowered its posture by cutting prices on products that had not been adjusted for a long time; it also launched co-branded collaborations with popular celebrities and hit IPs to attract fans to place orders. This series of moves has led to some improvement in Starbucks China's performance, with same-store sales in the latest quarter achieving growth for the first time since the end of 2023.

The recovery in performance has undoubtedly added some appeal to Starbucks' China business, and the matter of selling equity has once again been put on the agenda. However, people familiar with the matter who spoke to the media also noted that although discussions are still ongoing, the current investor list is not final, and other industry and financial investors may join as negotiations enter a deeper stage. Of course, it is also possible that no deal will ultimately be reached.

In response to the Bloomberg report, Starbucks declined to comment, and representatives of EQT, FountainVest Partners, Hillhouse Capital, KKR, and Primavera Capital also declined to comment. Boyu, Carlyle Group, JD.com, and Tencent did not respond to requests for comment.

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