Starbucks is currently weighing its options regarding its Chinese operations and considering the possibility of selling shares in the business to a local partner, according to a report.
The international coffee chain, which has been experiencing declining demand for its beverages in key markets like the U.S. and China, has been in discussions with advisers to consider bringing a local partner on board, Bloomberg reported, citing people in knowledge of the matter. '
This development comes as Starbucks aims to revamp its U.S. stores while gaining a deeper insight into its operations in China. The company has been actively gauging interest from potential investors, including domestic private equity firms.
A stake sale could also attract interest from Chinese conglomerates or local firms with industry expertise. However, Starbucks is still in the evaluation phase and has not made a final decision.
The coffee chain has been under a lot of pressure from Elliott Investment Management, which wants the company to thoroughly review its Chinese business. This approach is not unprecedented, as similar restaurant chains like McDonald's and Yum! Brands have opted to sell shares to local entities to better harness growth and cater to local tastes.
China ranks second in terms of global market share of Starbucks. The Chinese market alone generated approximately US$3 billion of net revenue in the most recent financial year, thanks to an extensive store expansion in the country.
Earlier this week, a spokesperson for Starbucks said that the company is "fully committed to our business and partners, and to growing in China."
"We are working to find the best path to growth, which includes exploring strategic partnerships," the spokesperson added.
Meanwhile, under the leadership of new CEO Brian Niccol, Starbucks is focused on improving employee work conditions, an issue that's become so prevalent that it led to unionization. Niccol plans to tackle operational challenges by increasing staffing in 3,000 stores and implementing the Siren Craft System — a legacy from former CEO Laxman Narasimhan — to streamline operations and minimize bottlenecks.
Niccol wants to recover the brand by making Starbucks more employee-friendly like his previous employer, Chipotle, which has seen its shares increase by 31%.
This year, Starbucks shares have underperformed, with its stock currently valued at 3 times its total sales in 2023. This is lower than McDonald's, which is valued at 8 times its sales, and Dutch Bros, which is valued at 3.7 times its sales.
