Starbucks is ceding majority control of its China operations to Boyu Capital in a strategic move to navigate fierce local competition and economic headwinds, while retaining a minority stake and brand licensing. This shift marks a significant departure from its former dominance in a market once central to its global expansion.
On November 4, 2025, Starbucks announced it would sell up to a 60% stake in its China retail business to private equity firm Boyu Capital, with the US company retaining a 40% interest. The deal, valued at approximately $4 billion as reported by multiple outlets, involves over 8,000 Starbucks outlets across China and represents one of the largest divestments by a global consumer company in the region in recent years. Starbucks will continue to license its brand and intellectual property to the new entity, ensuring its presence but with reduced operational control.
Starbucks entered China in 1999 with great fanfare, helping to cultivate a coffee culture in a traditionally tea-drinking nation and expanding rapidly during the country’s economic boom. At its peak, it was opening a new store every 15 hours, leveraging China’s growing middle class and making the market a cornerstone of its global strategy. The brand became a symbol of Western influence and accessible luxury, attracting customers eager to embrace new consumer experiences.
However, the competitive landscape has transformed dramatically in recent years. Dozens of domestic beverage chains have emerged, offering coffee at steep discounts and appealing to cost-conscious consumers. Luckin Coffee, founded in 2017, has overtaken Starbucks in both sales and store count in China, with prices as low as one-third of Starbucks’ offerings and a rapidly expanding presence that now includes ventures into markets like the United States.
Intense competition is compounded by China’s economic challenges, including a prolonged property downturn and high youth unemployment, which have dampened consumer spending and altered purchasing behaviors. Starbucks reported a 1% decline in same-store sales in China for fiscal 2025, driven by a 5% decrease in the average transaction value, reflecting broader pressures on discretionary spending amid economic uncertainties.
The surge of local rivals isn’t limited to coffee; tea chains like Mixue Bingcheng, ChaGee, and HeyTea have also captured significant market share with innovative drinks and aggressive pricing. Mixue, now the world’s largest food and beverage chain by store count, offers beverages for as little as 30 cents to $1.20, while Boyu Capital, Starbucks’ new majority owner, has previously backed Mixue, highlighting the interconnected nature of the market.
Starbucks’ struggles in China mirror broader issues it faces globally, including competition in North America from independent coffee shops and chains like Blue Bottle, as well as price sensitivity among customers comparing it to alternatives like McDonald’s and Dunkin’. Under CEO Brian Niccol, who took over last year, Starbucks has initiated a restructuring plan that includes store closures and menu adjustments, aiming to stabilize performance amid these headwinds.
The China divestment follows a year-long search for a local partner, with Niccol expressing confidence that the joint venture can accelerate growth, potentially expanding from today’s 8,000 stores to over 20,000 in the future. Analysts note that while the partnership could enhance competitiveness, menu innovation and digital transformation are crucial for Starbucks to regain ground against agile local competitors and evolving consumer preferences.