Starbucks Weighs Stake Sale in China, Follow McDonald and KFC
1min read Starbucks is reportedly considering strategic options for its operations in China, including selling a stake in the business, according to Bloomberg sources. The coffee giant is working with advisors to explore partnerships that could help it expand and adapt to the competitive Chinese market, where local players like Luckin Coffee Inc. have gained significant ground.
Rising Pressure from Activists
Elliott Investment Management, an activist investor, has been pushing Starbucks to conduct a thorough review of its Chinese operations. The move mirrors strategies used by other Western chains like McDonald's and Yum! Brands, which sold stakes in their Chinese businesses to local investors, enhancing growth and catering to regional preferences.
China: A Key Market
China is Starbucks' second-largest market, generating approximately $3 billion in revenue last fiscal year. Despite growing its store count by 12%, the company faces increasing challenges. The competitive landscape is described as extreme by Starbucks CEO Brian Niccol, who also highlighted tough macroeconomic conditions in the region. Niccol is evaluating ways to expand in China, with a focus on forming strategic partnerships to secure long-term growth.
Partnering with local players has become a common route for Western chains in China. Yum sold a stake in its Chinese operations to Primavera Capital in 2016, and McDonald's followed in 2017, selling a controlling interest in its China and Hong Kong businesses for $1.7 billion to a group led by Citic Ltd., a state-backed conglomerate.
Conclusion
As Starbucks navigates the challenging Chinese market, a strategic partnership or partial stake sale could be key to sustaining growth. However, the company must tread carefully to balance short-term gains with its long-term vision for one of its most important global markets.
