"Starbucks China" shifts from wholly-owned to joint venture: sells 60% stake in Chinese business to Bright China, plans to relaunch growth story in China.

Global coffee beverage giant Starbucks Corporation (SBUX.US) has agreed to sell a 40% stake in its Chinese business to private equity firm Boyu Capital for $4 billion, in an effort to improve the prospects of the world's largest coffee chain in the Chinese market. In a statement, the two parties announced that through a newly formed joint venture with Starbucks Corporation, Boyu Capital will hold up to 60% equity in Starbucks Corporation's retail business in China. Starbucks Corporation will retain the remaining 40% equity and continue to license the Starbucks Corporation brand and intellectual property to the joint venture. This major agreement marks the end of Starbucks Corporation's challenging search for a partner for the next chapter in its Chinese market. Since opening its first physical store in Beijing in 1999, Starbucks Corporation currently has around 8,000 stores in China. However, in recent years, Starbucks Corporation has faced difficulties in the Chinese market, similar to many other Western companies operating in China. Luckin Coffee, Inc. Sponsored ADR Class A (Luckin Coffee Inc.) based in Xiamen, sold coffee beverages two years ago at one-third the price of Starbucks Corporation, dethroning Starbucks Corporation from its position as the "largest coffee chain in China". Additionally, Starbucks Corporation's store maintenance costs are high, and consumer willingness to pay high prices for its beverages has decreased since the COVID-19 pandemic and ongoing global economic uncertainty. Prior to the agreement, media reports indicated that Boyu had emerged as the frontrunner, while Starbucks Corporation was evaluating five bids from potential bidders. According to its website, Boyu was founded in 2011 and is headquartered in the Cayman Islands. The company's investment areas include private equity, public equities, real estate, and infrastructure. The company also has a venture capital and renewable energy investment platform. Its private equity business invests in technology, consumer and retail, and healthcare sectors. Starbucks Corporation CEO Brian Niccol said in a blog post, "We see a path to grow from the roughly 8,000 Starbucks Corporation stores currently to over 20,000 stores in the future." The latest financial report from Starbucks Corporation shows that comparable store sales in the Chinese market unexpectedly increased by 2% in the fourth quarter, helping the company achieve positive same-store sales growth for the first time in over a year. Starbucks Corporation expects the total value of its Chinese retail business to exceed $13 billion, including the value of licenses/permits, according to the company's statement. In after-hours trading on the New York Stock Exchange, Starbucks Corporation's stock price briefly rose more than 4% following the major agreement with Boyu. However, the stock has declined by about 11% this year, significantly lagging behind the S&P 500 index's nearly 17% increase during the same period. As an important part of efforts to attract Chinese consumers back, Starbucks Corporation earlier this year opened free "study rooms" in some of its stores in China. Under the leadership of the new China head, Molly Liu, the coffee chain has expanded its beverage menu to include more sugar-free options and teas that cater to local tastes, lowered the prices of a range of beverages, and enhanced customization options for ordering. This contrasts with a series of recent operational actions in the United States, where Starbucks Corporation simplified its menu to improve store efficiency. Niccol strives to completely reverse Starbucks Corporation's performance decline. Facing multiple pressures such as rising coffee bean prices and the heavy impact of Trump's tariff policies, Starbucks Corporation under Niccol's leadership is working to reverse the adverse trend of declining same-store sales for six consecutive quarters. In addition to making Starbucks Corporation cafes more attractive to consumers, newly appointed Starbucks Corporation CEO Brian Niccol is trying to continuously update Starbucks Corporation's menu, add staff to stores, and introduce key technology to simplify the ordering process. On the operational front, Niccol has already made a series of significant personnel changes, from tightening dress codes for baristas to cutting over 1,000 company employees and requiring some employees to relocate to Seattle. Starbucks Corporation has also awarded some executives stock grants worth up to $600 million, with these larger rewards expected to be redeemed as they quickly advance business transformation while controlling costs. Under Niccol's leadership, Starbucks Corporation is taking various positive actions globally to improve sales. For example, the return of the Pumpkin Spice Latte, renovations of numerous physical stores in the United States, upgrades to mobile apps and mobile ordering systems to enhance customer experience, and the implementation of the "Green Apron Service" model, which aims to standardize transaction processes, sales, and customer service times across its coffee shops. Starbucks Corporation has said that stores implementing this model have seen improvements in transaction volume, sales, and customer service times. While Starbucks Corporation has only renovated 70 stores so far, mainly in New York and Southern California, the company's management expects the pace to accelerate, with over 1,000 stores renovated by the end of the current fiscal year (ending in September next year). CEO Niccol said during a financial results conference call, "Although the sample size is still small, we are encouraged by the improvements in current sales and transaction volume."