Starbucks China Business Attracts $90 Billion Bids, Starbucks Seeks 30% Stake

Starbucks' China business has attracted significant interest from potential buyers, with multiple acquisition proposals received for its operations in the region. The estimated valuation for Starbucks' China business is approximately $90 billion. Among the potential buyers is Centurium Capital, the largest shareholder of Luckin Coffee, which holds a significant stake in the company. This development is part of a broader trend where major investors are eyeing control over Starbucks' China business, aiming to secure a significant stake in the market.

The acquisition proposals indicate that most investors are interested in obtaining controlling stakes in Starbucks' China operations. This would allow them to have a decisive say in the business's strategic decisions and align the operations more closely with their investment strategies. Starbucks, however, has expressed a preference for retaining a "substantial" portion of the shares, indicating a desire to maintain influence over the brand's direction and quality standards in China.

Starbucks has emphasized that it has no plans to completely sell its China business. The company aims to retain approximately 30% of the shares, with the remaining stock to be divided among multiple buyers, each holding less than 30% of the shares. This structure suggests that Starbucks intends to maintain a significant level of control over its China operations.

Centurium Capital, the largest shareholder of Luckin Coffee, has been actively involved in the company's management. Recently, the company announced that Guo Jinye would no longer serve as the chairman but would continue as the CEO and a board member. The board has approved the appointment of Li Hui, the chairman and CEO of Centurium Capital, as the new chairman of Luckin Coffee. This move indicates that Centurium Capital is increasing its involvement in Luckin Coffee's operations and strategic decisions.

Luckin Coffee has been experiencing rapid growth. In the first quarter, the company's revenue increased by 41.2% year-over-year to 88.7 billion yuan. The revenue from self-operated stores was 67.8 billion yuan, a 42.2% increase year-over-year, with same-store sales growing by 8%. The revenue from franchised stores was 20.8 billion yuan, a 38% increase year-over-year. As of March 31, Luckin Coffee had a total of 24,097 stores.

In contrast, Starbucks' China business reported revenue of $7.397 billion for the same period, a 5% year-over-year increase. Same-store sales remained flat, while same-store transactions increased by 4% year-over-year. However, the average transaction value decreased by 4% year-over-year. As of the end of the period, Starbucks had 7,758 stores in China.

Starbucks has recently implemented price reductions on several of its products in China. Starting from June 10, the company reduced the prices of its three main categories: Frappuccino, iced tea, and tea latte, with an average price reduction of around 5 yuan for large-sized drinks, with the lowest price being 23 yuan. This move is likely aimed at attracting more price-sensitive consumers in the competitive Chinese market.

For Luckin Coffee, collaborating more closely with Starbucks could provide strategic advantages. By leveraging Starbucks' brand recognition and operational expertise, Luckin Coffee could enhance its competitive position in the market. However, the final decision on the acquisition will ultimately depend on Starbucks' strategic considerations and its desire to maintain control over its China operations.