Seven years ago, Starbucks China acquired all its stores in mainland China and may introduce new partners.
On November 20th, Bloomberg reported that informed sources revealed that Starbucks is exploring various options for its China business, including the possibility of selling a portion of its equity. Starbucks has been discussing various ways to expand its business in China with consultants, including the possibility of introducing local partners. Currently, Starbucks has informally solicited the interest of potential investors, including domestic private equity firms. Starbucks is still under evaluation and has not made a formal decision yet.
On November 21st, a reporter from Nanduwan Financial News Agency inquired about the situation with Starbucks China. The relevant person in charge stated that Starbucks' global spokesperson responded to this, "We are wholeheartedly committed to our business, partners (employees), and long-term development in the Chinese market. As stated in the fourth quarter earnings conference call, the company is taking the time to gain a deeper understanding of our business operations and market competition environment in China. We are working hard to find the best growth path, including exploring strategic partnerships
In other words, introducing strategic partners is indeed a strategy that Starbucks China is considering, and it is unclear whether to adopt the method of selling equity and the proportion of the sale.
Ge Xiantong, founder of Qingjing Capital, analyzed to reporters from Nanduwan Finance that Starbucks China needs significant adjustments to cope with the current business difficulties, and hopes to obtain scarce resources by introducing local capital. As for how much equity the introduced partner will hold in Starbucks China, it is currently in the negotiation stage. Starbucks China should release the news now, hoping to attract more capital. Ideally, Starbucks would own 51% of the shares, but if the introduced capital party wishes to take control and promises performance or signs a betting agreement, it would also be a good choice for Starbucks.
In fact, Starbucks initially entered the mainland Chinese market by authorizing local companies to franchise and establish joint ventures. In 1999, Starbucks officially entered the mainland Chinese market and opened its first store in Beijing. Initially, it was franchised by Beijing Meida Co., Ltd. in the North China market, by Taiwan Uni President Group in the East China and Taiwan markets, and by Hong Kong Meixin Group in Guangdong and Hong Kong.
But soon, Starbucks gradually increased its stake in these authorized companies until it acquired all the equity. In 2006, Starbucks acquired 90% of the equity of Beijing Meida Co., Ltd. The following year, it acquired the remaining 10% of the equity, and all of the North China market was directly operated; In June 2011, Starbucks acquired a 30% stake in a joint venture company held by Maxim's Hong Kong, thereby obtaining 100% ownership of its business in Guangdong, Hainan, Sichuan, Chongqing, Hubei, and Shaanxi; In August 2017, Starbucks spent $1.3 billion (approximately RMB 8.759 billion) in cash to acquire a 50% stake in a joint venture company held by Taiwan's Uni President Group, fully acquiring approximately 1300 stores in Shanghai, Jiangsu, and Zhejiang. As a result, all Starbucks stores in mainland China are now directly operated by Starbucks. At present, Starbucks is still franchised by Taiwan Uni President Group in the Taiwan market, and by Maxim's Group in Hong Kong.
From "reclaiming equity" to now preparing to "introduce investors", Ge Xiantong told reporters from Nanduwan Financial News that in the past, Starbucks withdrew its equity because it believed that the development prospects of China's coffee market were very good, and the headquarters had to operate on its own. At that time, the withdrawal of equity also gave a relatively high premium. However, now Starbucks' operations in its headquarters - the domestic market in the United States - have also encountered problems and crises, and the management's attention needs to be more focused, making it difficult to take into account markets outside of China. Therefore, it is necessary to introduce local enterprises in China.
Ge Xiantong further pointed out that referring to the stock price performance of Yum! Brands China after its spin off and independent listing, if Starbucks China's market capital operation is well managed, it may be a good thing for the company's stock price. The possibility of Starbucks China being completely franchised by strategic partners is relatively small, and the more likely option is to explore joint ventures.
Previously, both McDonald's Global and Yum! Brands sold their business in the Chinese market to private equity firms. In 2016, Yum! Brands sold a portion of its equity in the Chinese market to Chunhua Capital and Ant Financial, after which Yum! Brands China went public through a spin off; In 2017, McDonald's Global sold 52% of its equity to CITIC Group and CITIC Capital for HKD 16.141 billion. After the transaction was completed, CITIC Consortium, Carlyle Group, and McDonald's Global held 52%, 28%, and 20% of the equity, respectively. In October 2017, McDonald's (China) Co., Ltd. was renamed Golden Arches (China) Co., Ltd.
Currently, Starbucks is facing pressure in its operations in the US and Chinese markets. The latest financial report shows that in the fourth quarter of the 2024 fiscal year (from July 1 to September 29), Starbucks' revenue in the US market decreased by 2.80% year-on-year to $6.245 billion, and same store sales decreased by 6% year-on-year; During the same period, Starbucks China's revenue decreased by 6.77% year-on-year to $784 million, with an average order value drop of 8% and a same store transaction volume drop of 6%, collectively driving a 14% decrease in same store sales.