Starbucks’ Strategic Shift in China
Starbucks is currently undergoing significant strategic changes in China, an important market that accounts for over 8% of the company’s global sales and is the largest market outside the USA. These developments could provide new growth impulses for investors.
Expansion Plans and New Formats
Starbucks plans to increase the number of stores in China from approximately 6,800 to 9,000 by the end of 2025, representing a 32% increase. This expansion aims not only at major cities but also at lower-tier cities where local competitors such as Luckin Coffee have gained ground. Moreover, the company is experimenting with new store formats such as pure takeout, drive-thru, and delivery services to better meet the needs of busy urban consumers.
Strategic Realignment and Partnerships
To address the intense competition from aggressive local brands that offer affordable prices and technology-driven loyalty programs, Starbucks is undergoing a corporate realignment that includes digital transformation and the formation of strategic partnerships.
Possible Sale of Shares
Starbucks has received several offers that value its China business at up to $10 billion while considering the sale of a minority stake, retaining a ‘significant’ share (about 30%). This move is aimed at freeing up capital for further expansion through local partnerships. Interested bidders include private equity firms such as Centurium Capital, Hillhouse Capital, Carlyle Group, and KKR.
Market Challenges
Despite these efforts, Starbucks’ market share in the premium coffee segment in China has significantly dropped – from around 34% in 2019 to about 14% by early 2025. Same-store sales stabilized after several quarters of decline. Recent initiatives such as price reductions and the introduction of sugar-free drinks have not significantly reversed this trend so far.
Conclusion for Investors
The planned expansion together with potentially fresh capital from the share sale could revive Starbucks’ growth prospects in China if well executed. However, given the intense competition from agile local players, success is not guaranteed; rapid adaptation remains a challenge in the face of rapidly evolving market dynamics in China. On the valuation side, some bids value the China business at nearly $10 billion, reflecting optimism about long-term potential. Analysts, however, warn that this could be optimistic without clear signs of a recovery in profitability following pandemic losses.