KKR & Co, Fountainvest Partners, and PAG are among the buyout firms interested in acquiring a stake in Starbucks’ China business, as the US coffee giant explores options to revive sluggish sales, according to a report by Reuters.
The report cites unnamed sources familiar with the matter as revealing that Starbucks has also approached Chinese companies, including state-owned China Resources Holdings and food delivery giant Meituan, as potential buyers.
Senior Starbucks executives, including Executive VP and CFO Rachel Ruggeri, are expected to visit China in the coming weeks for discussions, two sources revealed.
The size of the stake up for sale has yet to be determined and will be subject to negotiations, although Starbucks is leaning toward a franchisee deal with a strategic partner, a model that could value the firm’s China business at over $1bn, two sources said.
If finalised, this approach would mirror Yum Brands’ strategy, where Primavera Capital and Ant Financial took a stake in Yum China in 2016, leading to a separate listing and a franchisee model for KFC, Pizza Hut, and Taco Bell in China.
Starbucks faces mounting challenges in China, including: a slowing economy and declining consumer spending, as well as fierce competition from local chains such as Luckin Coffee, Cotti, and Mixue Bingcheng, which have rapidly expanded through franchise models and offer lower-priced beverages — many under RMB10 ($1.38), while an espresso at Starbucks China still costs RMB19.
Starbucks is aiming to finalise a deal for its China business by year-end, though the transaction structure remains flexible.
