Starbucks announced on Monday that it is forming a joint venture with Boyu Capital to operate its China business, with the investment firm acquiring a controlling stake in a deal valued at $4 billion. This strategic move aims to revitalize Starbucks’ operations in China amidst intense competition and recent sales declines.
Under the agreement, Boyu Capital will hold up to a 60% interest in the joint venture, while Starbucks retains a 40% stake and continues to license its brand and intellectual property. The enterprise value of the China business is approximately $4 billion on a cash-free, debt-free basis, with Starbucks estimating the total value, including retained interest and future licensing fees, at over $13 billion. The deal is expected to close in the second quarter of fiscal 2026, pending regulatory approvals from Chinese authorities. This structure allows Starbucks to reduce its operational risks while maintaining a significant presence in the market.
Starbucks first entered China in 1999 and rapidly expanded, making it the company’s second-largest market after the United States by 2015. Today, the coffee chain operates roughly 8,000 stores across the country, but it has faced mounting challenges in recent years. CEO Brian Niccol has expressed ambitious growth targets, suggesting that China could eventually support 20,000 to 30,000 locations, highlighting the long-term potential despite current hurdles.
The company’s sales in China have plummeted due to a combination of factors, including pandemic-related government restrictions and fierce competition from local rivals like Luckin Coffee. Luckin now boasts more stores in China than Starbucks and has captured market share with lower-priced beverages. In the fiscal fourth quarter, Starbucks reported a 2% increase in same-store sales in China, driven by a 9% rise in customer traffic, but this was offset by a decline in average ticket prices as the company leaned into discounting to compete.
This partnership with Boyu Capital follows a months-long review by Starbucks of various strategic options for its China operations. Molly Liu, CEO of Starbucks China, stated that the collaboration will ‘fully unlock the vast market opportunity’ by leveraging Boyu’s local expertise and financial resources. The joint venture model is designed to accelerate store expansion, enhance competitiveness, and tap into China’s evolving consumer preferences without Starbucks bearing the full burden of capital investment.
The deal reflects a broader trend among multinational companies reassessing their strategies in China. While some, like Burger King’s parent company, have struggled and sought to exit the market, others like McDonald’s have increased their stakes to capitalize on growth. China’s economic slowdown and the rise of domestic brands have forced many foreign firms to adapt, often through partnerships or restructuring to better navigate local dynamics.
For Starbucks, the joint venture could provide the necessary capital and insights to overcome operational challenges and pursue aggressive expansion. By retaining a minority stake and ongoing licensing revenue, Starbucks ensures continued involvement in one of its key markets while sharing risks with a seasoned investor. This approach may help stabilize profits and position the company for sustained growth in a region that remains critical to its global strategy.
Looking ahead, the success of this venture will hinge on effective execution, regulatory approvals, and the ability to compete against entrenched local players. If finalized, the deal could serve as a blueprint for other international brands facing similar pressures in China. Starbucks’ collaboration with Boyu Capital will be closely watched as a test case for how global companies can thrive in complex, competitive markets through strategic alliances.