Starbucks denies full China exit but confirms stake sale talks

US coffee giant Starbucks has denied reports that it is planning a full exit from its China business, following a story by Chinese financial publication Caixin that claimed the company had begun a formal sale process and was in talks with dozens of potential buyers. In a statement on June 23, a Starbucks spokesperson said, “I can confirm Starbucks is not currently considering a full sale of its China operations.” However, the company acknowledged ongoing discussions with investors, confirming earlier reports that it had launched a process to evaluate strategic options for its business in China.

According to a report by Reuters, Starbucks, advised by Goldman Sachs, initiated the process in May, inviting interested parties to submit detailed responses regarding their corporate culture, business strategy, sustainability credentials, and treatment of employees. While over 20 institutions, including private equity (PE) firms like KKR & Co., FountainVest Partners, and PAG, have shown interest, the Seattle-based coffee giant has not yet decided whether to sell a controlling or minority stake or retain key parts like the supply chain.

Rising competition forces strategic shift

Starbucks’ reconsideration of its China strategy comes amid rising pressure from local competitors, notably Luckin Coffee and Cotti, which have gained ground by offering significantly lower prices. These homegrown brands, bolstered by subsidies and e-commerce-led delivery models, have pushed the price of a cup of coffee in China to below 5 yuan (about $0.70), compared to Starbucks’ typical 30 yuan ($4.20) pricing.

The company’s market share in China—once a dominant 34 per cent in 2019—has shrunk down to just 14 per cent in 2024, according to Euromonitor International. Despite opening hundreds of stores, revenue from China dropped from $3.7 billion in 2021 to $3 billion in 2023.

Earlier this month, Starbucks announced its first-ever price cut in the Chinese market, lowering prices on select non-coffee iced drinks by an average of 5 yuan to regain competitiveness.

Long-term commitment, but tactical realignment

Starbucks emphasised its long-term commitment to China, stating it is exploring “the best ways to capture future growth opportunities” in the world’s second-largest economy. CEO Brian Niccol, who took the reins in late 2024, has confirmed that investors had shown “a lot of interest” in acquiring a stake in the China business.

The potential stake sale appears to be part of a broader strategic overhaul, which includes store redesigns, technology integration for faster service, and headcount reductions—over 1,000 jobs have already been cut globally as part of this restructuring.

While shares of Starbucks rose slightly in extended trading following the Caixin report, investor sentiment remains cautious, with retail sentiment on Stocktwits still flagged as “bearish”. Starbucks stock is up 1.2 per cent year-to-date.