7.3 billion yuan, Starbucks is selling in China?

Wen| Rongzhong Finance

Starbucks China, is going to be sold?

It is reported that several private equity funds such as KKR, Fangyuan Capital, and Taimeng Investment Group (PAG) are interested in acquiring equity in Starbucks ‘China business. At the same time, Chinese-funded companies such as China Resources Group and Meituan have also approached Starbucks because they are regarded as potential buyers.

In response, a Starbucks Global spokesperson declined to confirm market rumors, while Starbucks Global CEO Brian Niccol responded to the matter in a speech on a previous earnings conference call, saying,”I see the vitality and future opportunities in this market, and I also see some short-term adjustments that can be made to strengthen our business, while continuing to explore strategic partnerships to continue to grow in China.” rdquo;

Behind this news lies the multiple difficulties Starbucks has encountered in the China market: declining performance, erosion of market share by local brands, and wavering strategic positioning.

Starbucks, which once occupied a market advantage with its third-space concept and high-end positioning, now faces the impact of its takeout business, the weakening of offline social attributes, and consumers ‘pursuit of cost-effectiveness. At the same time, frequent management changes and shifts in strategic focus have also made Starbucks ‘future in the China market full of uncertainty.

The sale rumors are not isolated incidents. They reflect the localization challenges faced by multinational brands in the China market, the game of consumption upgrades, and the contradiction between brand positioning and market demand. Regardless of whether it ends up for sale or not, Starbucks’s dilemma reminds foreign brands that in the competition in the China market, mere cultural symbols are no longer enough to gain a foothold. Only by deeply integrating into the local market, flexibly adjusting strategies, and optimizing products and services can we maintain our position in the fierce market competition.

Starbucks China cuts its tail to survive?

At the beginning of 2025, a piece of heavy news has stirred up the coffee market and Starbucks ‘China business may be sold. Potential buyers include giants such as China Resources, Meituan, KKR, and Fangyuan Capital, with a transaction valuation of more than US$1 billion.

Recently, it was reported that private equity firms such as KKR, Fountainvest Partners and PAG are interested in acquiring equity in Starbucks ‘China business. In addition, sources also revealed that China companies including China Resources Group and Meituan are also regarded as potential buyers. Rachel Ruggeri, executive vice president and chief financial officer of Starbucks, is expected to visit China in the coming weeks with other company executives to negotiate a stake sale.

A Starbucks Global spokesperson declined to confirm market rumors and responded to the matter with Starbucks Global CEO Brian Niccol’s speech on the first quarter 2025 earnings conference call, saying that I see the vitality and future opportunities in this market, and I also see some adjustments that can be made in the short term to strengthen our business, while continuing to explore strategic partnerships to continue to grow in China.” rdquo;

Starbucks China was once a top student in the global market.

The financial report shows that for the full year of fiscal year 2023, Starbucks ‘global consolidated net income reached US$36 billion, a year-on-year increase of 12%. Among them, Starbucks ‘China market achieved revenue of US$840.6 million in the fourth quarter of the year, a year-on-year increase of 15% excluding exchange rate effects; revenue for the full fiscal year reached US$3 billion, a year-on-year increase of 11%.

Starbucks is accelerating its occupation of the China market. As of the fourth quarter of fiscal year 2023, Starbucks has net new stores in China, and the total number of stores in China has reached 6806, a year-on-year increase of 13%. This is equivalent to opening nearly 4 new stores every day, setting a record high.

However, since the second quarter of fiscal year 2024, the company’s performance has declined for four consecutive quarters. Specifically, from the second quarter to the first quarter of the following year, the company’s total revenue decreased by 1.84%, 0.62%, 3.18% and 0.29% respectively, while the decline in net profit attributable to the parent company was even more significant, reaching 14.96%, 7.61%, 25.42% and 23.78%, respectively.

Behind the decline in performance is the low-cost encirclement and suppression of local brands. Brands such as Lucky and Cudi reshaped market rules with regular promotions of 9.9 yuan, while the unit price of Starbucks customers was anchored at more than 30 yuan for a long time, accelerating the loss of price-sensitive consumers. Even if Starbucks tries to expand its market and launch co-branded products and coupons, the effect is limited. Low-tier cities have low acceptance of high-priced coffee, and the promotion actually lowers the tone of the brand.

The bigger contradiction lies in the division of strategic positioning.

Starbucks once said that it would not participate in the price war, but in the face of loss of market share, Starbucks had to issue coupons and launch packages many times, and even lowered the price of a single cup on the Meituan platform to 19.9 yuan, causing damage to the brand’s high-end image. At the same time, frequent changes in management have also exacerbated strategic uncertainty. Although new CEO Brian Nicol proposed a plan to return to Starbucks, the focus is on store renovation in the North American market, and only emphasizes exploring partnerships in the China market., even interpreted by the outside world as a precursor to sales.

If the sale comes true, Starbucks China’s choice reflects the plight of multinational brands in China. On the one hand, by introducing local strategic investors (such as China Resources ‘retail resources and Meituan’s traffic portal), we can quickly open up sinking market channels and optimize supply chain efficiency; on the other hand, the franchise model can reduce the pressure on direct sales costs, but may weaken brand control. It is worth pondering that potential buyers KKR, Fangyuan Capital, etc. have led the spin-off of Yum China, and Nicole himself also has experience in splitting Yum China, which adds a sense of script to the transaction.

However, selling is not a panacea. Starbucks China still needs to face three major challenges:

How to balance high-end positioning and price competitiveness to avoid becoming a follower of affordable coffee; find differentiated paths in sinking markets to avoid the trap of losing money when opening a store; and rebuild young consumers ‘recognition of the brand and reverse the rise of the national tide., the cognitive inertia of foreign investment ebbing.

Starbucks’s dilemma is essentially a microcosm of the game between consumption upgrading and localization of foreign brands in China. When cost-effectiveness becomes the mainstream narrative, the former halo of cultural symbols is fading, and only more agile strategic adjustments and deeper local integration can we hold our position. Whether it is sold or not, the core logic of this coffee war is no longer a duel between Starbucks and Luckin, but a scuffle about efficiency, innovation and consumer mentality.

“Why is the third space not fragrant?

The advantages of the third space concept that Starbucks China was once proud of are being eliminated.

On the one hand, the proportion of takeout business has increased, and the social attributes of offline experience have weakened; on the other hand, the saturation of store density has led to the diversion of passenger flow in single stores. In response to the crisis, Starbucks China established a chief growth officer for the first time, trying to attract users through digital marketing and younger products, but the launch speed of new products is still not as fast as that of local competitors.

“The concept of third space was first proposed by American sociologist Ray Aldenberg. It refers to social places outside home (first space) and work (second space), emphasizing its social attributes and emotional connection function.

In China, Starbucks is undoubtedly a typical representative of the concept of third space. In fact, in addition to Starbucks, many companies have also tried to attract users through the third space concept and even integrated it into their business models.

For example, real estate brands have integrated the concept of third space into community construction, creating diversified scenes such as central living rooms, underforest spaces, and elevated floors. For example, the forest treasure box in Hesong Image Mansion in Hangzhou and the community box in Donglu in Beijing not only provide leisure places, but also enhance neighborhood interaction through community activities such as gardening, handicrafts, and art salons. Upgrade physical space to a relationship organization platform. Traditional teahouses (such as Beijing Lao She Teahouse) continue the function of the third space through cultural activities such as storytelling and drum drums.

The new gymnasium combines sports and social networking to create a relaxed atmosphere and meet the physical and mental needs of urban people. Live broadcast platforms such as WeChat Group and Douyin Fast Hand and game communities have become the third space in the digital age. Especially during the epidemic, users made up for the lack of offline social interaction through online interactions. Convenience stores, community cafes, bookstores and other business formats have become a gathering point for residents ‘daily social interactions by providing free Wi-Fi, casual seats, and themed activities such as book clubs and handicraft activities. For example, community commercial spaces in Beijing and Shanghai try to enhance user stickiness through humanized design.

Although third space was once popular in China, its popularity has dropped significantly in recent years.

This is because, as the pace of life accelerates, the proportion of fast coffee scenarios such as takeout and self-picking has increased significantly, and consumers are pursuing convenience rather than immersive experience.

In the second quarter of fiscal year 2022, Starbucks ‘mobile orders accounted for 47% in China, and the offline social value of its third space was diluted. At the same time, brands such as Ruixing and Cudi have seized the market with a 9.9-yuan coffee strategy, focusing on high cost performance and fast service, weakening the appeal of high-priced third spaces such as Starbucks.

The younger generation relies more on online social networking methods such as Short Video, WeChat or games, and the frequency of offline space is decreasing. At the same time, urbanization has exacerbated the sense of atomic loneliness, but consumers prefer low-cost, low-threshold solutions, such as community convenience stores, rather than traditional high-end third spaces. Companies such as Starbucks have to bear high rent and labor costs to maintain a third-space experience, but frequent price cuts and promotions damage the brand’s high-end image, which ultimately leads to a decline in customer unit prices.

In addition, the sinking market has limited acceptance of high-priced coffee, and it is difficult to improve product efficiency after expansion. Consumers ‘sense of identity with local culture has increased, and national trend brands (such as Xi Tea and Tea Beauty) have captured the minds of young users by integrating traditional culture with modern design. In contrast, Starbucks ‘Western-style petty bourgeoisie label has gradually lost its appeal, and even aroused public opinion disgust due to arrogant incidents.

For example, Starbucks reported last year that it would increase its efforts to promote the policy of ordering seats. Some consumers posted on social media saying that if they did not order, they would be expelled from the store.“”“” This incident triggered discussions among netizens. Some netizens believed that it was natural to go to the store to spend money. If Starbucks was not a coffee shop but a restaurant, it would not be allowed to go in and sit for an afternoon without ordering food. Moreover, if people who use air conditioning and wifi were invited out of the store, the real consumer experience would be better; but at the same time, some netizens believed that this was a kind of pride on the part of the brand and did not recognize this behavior.“‘’”“”

Despite the challenges faced by traditional third spaces, its core concepts of social and emotional connectivity are still valuable.

Companies need to adjust their strategies based on new trends: for example, Ruixing uses small store model + digitalization to balance costs and efficiency; teahouses and national trend brands tap local cultural IP to enhance emotional resonance. In short, the third space has not disappeared, but has evolved into a new form with social changes. Companies need to find a new balance between efficiency and experience, business and humanities, in order to occupy a place in future competition.

Is there any chance?

As a brand that has been in China for nearly 30 years, Starbucks has a strong customer base in China. If Starbucks wants to further increase its brand share in the China market in the future, it can start from multiple dimensions such as product innovation, marketing strategies, service experience and operation optimization to create a more competitive brand ecosystem.

In terms of product innovation, Starbucks should combine local flavors of China to develop coffee drinks and foods that integrate Chinese flavors, such as osmanthus lattes, Chinese cakes, etc., and use digital technology to achieve personalized customized services to meet the diverse needs of consumers. In addition, promoting sustainable products, such as environmentally friendly packaging and green coffee beans, will also help enhance the brand’s social image and consumer identity.

In terms of marketing innovation, Starbucks needs to make full use of the power of social media and content marketing to display coffee culture through Short Video, live broadcasts and other forms to attract the attention of young consumers. At the same time, optimize the membership system, provide personalized services and exclusive benefits, and enhance consumer stickiness. In terms of offline experience, creating themed stores and community interactive activities, and holding coffee tasting sessions and public welfare activities can not only enhance the cultural connotation of the brand, but also enhance interaction with consumers. In addition, through cross-border cooperation with well-known brands or popular IPs, the launch of joint products and themed activities will also inject new vitality into the brand.

In terms of services and operations, Starbucks should strengthen employee training, improve the professional skills and service levels of baristas, and at the same time optimize supply chain management, reduce procurement costs, and ensure the freshness of raw materials and supply stability. In addition, Digital tools are used to optimize inventory management, promote automated equipment, and improve store operating efficiency to cope with increasingly fierce market competition.

Starbucks ‘development in the China market needs to be closely integrated with local culture and consumer needs, and to achieve deep integration of the brand and the market through various efforts such as product innovation, marketing optimization, service improvement and operational efficiency improvement. Only by continuing to pay attention to market dynamics and flexibly adjusting strategies can Starbucks stand out from the competition and further consolidate its leading position in the China market.

Whether Starbucks China will be sold has not yet been decided. However, whether it is sold or not, what really determines its fate is whether companies can develop more attractive strategies in the future as China consumers ‘needs for the concepts of coffee and space change.