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Starbucks has received “many interest” in selling stakes in its Chinese business as US coffee chains explore partnerships with outside investors to recover their growth.
Brian Nickol said in an interview with the Financial Times that Starbucks is exploring the sale of minority stakes in the Chinese force, which operated 7,758 stores as of the end of March.
“The good news is that we have a lot of interest, a lot of interest,” he said Tuesday. “People see the value of the Starbucks brand. They think the coffee category is growing. We want to work with us to come up with how we can adopt this in 8,000 to 20,000 (stores).”
Mainland China has become the second largest market based in Seattle since it first entered the country in 1999. China is supporting Starbucks’ global expansion, betting on middle-class consumers drinking more specialized coffee. In 2022, the company set its goal of establishing 9,000 stores on the mainland by 2025.
However, revenue from China fell from a peak of $3.7 billion in 2021 to $3 billion in 2024, even if Starbucks built hundreds of new stores. Low-priced domestic competitors like Luckin Coffee and Cotti Coffee are growing, but weak economic backgrounds have led to increased concerns about consumer demand.
This week, Starbucks announced an average price cut of RMB5 (70 cents) for over 20 iced and tea-based drinks, targeting what is called “China’s fast-growing non-working market.” The bubble and milk tea brand has also expanded dramatically in the mainland in recent years, selling drinks for just $1.
“China’s strategy is that we want to be more competitive,” Nicole said. The company said it would need to modify its “pricing architecture” especially for drinks that are not working for.
Nicole, who became CEO in September, spoke when Starbucks brought in 14,000 employees at a three-day leadership gathering in Las Vegas this week. Starbucks China CEO Molly Liu was among the executives of the event.
Starbucks said it was exploring a “strategic partnership” in China last year after sales fell in the same store, but gave little details.
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Those familiar with the process said a mixture of private equity companies and strategic investors from China and around the world were considering buying the stock, but they warned that it was in the preliminary stage. Goldman Sachs is leading the process, according to people close to the issue.
Nicole refused to say which potential investors showed interest, but said his company would “experience exercises to see if it makes sense to have a partner.”
“We’re flexible about how it looks and we want to have a meaningful interest in it,” he said.
He added that Starbucks is not in a hurry. “Make the process a process.”
Additional reports by Arjun Neil Alim in Hong Kong and Thomas Hale in Shanghai
