Apparently, the world’s largest coffee chain is a hot commodity in its second-biggest market.
Starbucks is attracting considerable interest from private-equity firms as it seeks a partner for its operation in China, enough to value that business at up to $10 billion, CNBC reported this week.
Several private-equity firms are interested in Starbucks China, CNBC reported, including Luckin Coffee investor Centurium Capital and Hillhouse Capital, both out of Asia, along with U.S. firms Carlyle Group and KKR & Co.
Starbucks wants to maintain a “meaningful stake” in the China business, the company said. The CNBC report said that the coffee giant wants to keep a 30% stake in its China operation.
“We see significant long-term potential in China and are evaluating the best ways to capture the future growth opportunities,” a Starbucks spokesperson said in an emailed statement on Wednesday. “We are looking for a strategic partner with like-minded values, who shares our vision to provide a premium coffeehouse experience.
“We remain committed to China and want to retain a meaningful stake in the business. Any deal must make sense for Starbucks’ business and partners.”
Starbucks has been examining the future of its China business for much of the past year. China is Starbucks’ second-biggest market and its highest growth operation. The company has about 7,700 locations in the fast-growing country.
Starbucks has largely operated that market itself, a common strategy for many brands there eager to grow in the market. But that operation has come under some pressure recently as high-growth coffee chains like Luckin have peppered the country with mostly small, digital-focused locations that sell low-priced beverages.
That growth has hurt Starbucks’ sales, which has exacerbated the chain’s challenges over the past 18 months as its larger U.S. business has faltered.
Starbucks has taken a number of steps to turn around that market, including lower prices, particularly on non-coffee business. It has also added technology and has worked to reduce worker turnover.
The coffee shop giant is hardly the only company that has faced questions about ownership. The market has periodically proven challenging for U.S. brands, for a variety of reasons, and investors often push companies that have owned their restaurants in that market to either sell the restaurants to franchisees or spin them off as separate operations.
KFC owner Yum Brands in 2016 spun off its China operation as a franchisee, now known as Yum China. More recently, Restaurant Brands International acquired the Chinese operations of Popeyes and Burger King, believing that the market deserves more growth than has been the case there in recent years.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.