Starbucks and Western Firms Struggle in China Amid Local Competition and Economic Malaise

Starbucks is reportedly considering selling a majority stake in its China business, valued at up to $10 billion. China has become a challenging market for western firms due to economic malaise, deflation, falling wages, and geopolitics. Local rivals like Luckin Coffee have gained ground by offering takeaway options, deep discounts, and localized features, mirroring global offerings at lower costs.

Starbucks is reportedly considering selling a majority stake in its China business, with valuations reaching up to $10 billion. This move comes amidst significant challenges faced by western firms in China, including economic malaise, deflation, falling wages, and geopolitical tensions. Local competitors like Luckin Coffee have capitalized on these conditions by offering takeaway options, deep discounts, and localized features, mirroring global offerings at lower costs [1].

The coffee chain, which has 7,758 stores in China as of March, has seen its market share drop to 14% in 2024 from 34% in 2019, according to Euromonitor International. Starbucks' same-store sales in China were flat in the first quarter of 2025 after four consecutive quarters of decline. To address these challenges, Starbucks has implemented strategies such as price cuts and the introduction of sugar-free options [1].

The potential sale is akin to McDonald's offloading its Chinese business in 2017, with Starbucks retaining a meaningful stake to ensure future gains and influence over incoming partners. The deal process is being led by Goldman Sachs, with a shortlisting of potential buyers expected to be concluded in two months [1].

Several private equity firms, including Centurium Capital, Hillhouse Capital, Carlyle Group, and KKR & Co., have submitted non-binding offers, with valuations ranging from $5 billion to $10 billion. Starbucks is committed to retaining a significant stake in the business and is evaluating offers, deal structure proposals, and post-sale value creation pitches [1].

The sale process underscores the growing interest in China's market, despite economic headwinds. Investors are under pressure to deploy idle capital, making Starbucks an attractive option. However, the final valuation and deal structure remain uncertain, with Starbucks retaining the option to put off the bidding process if offers fail to meet its expectations [1].

References:
[1] https://www.cnbc.com/2025/07/09/starbucks-china-attracts-bids-valuing-the-coffee-chain-at-up-to-10-billion.html