The Seattle-based coffee chain said the investment from Boyu will help accelerate its expansion in the world’s second-largest economy, where lower-priced competitors like Luckin and Cotti have eroded its market share.
“We aim to bring the Starbucks experience to more customers, in more cities across China. We see a path to grow from today’s 8,000 Starbucks coffeehouses to more than 20,000 over time,” Chief Executive Brian Niccol said in a statement.
Under the deal, Boyu — founded by the grandson of former Chinese President Jiang Zemin — will hold up to 60% of a new joint venture. Starbucks will retain 40% and continue licensing its brand and intellectual property.
Starbucks said the combined value of the sale, its remaining stake, and future licensing income over at least the next decade will exceed $13 billion. Its shares fell 3% in early US trading on Tuesday.
The company, credited with popularizing coffee culture in China since 1999, has seen its market share drop to 14% last year from 34% in 2019, according to Euromonitor International.
Analysts say Starbucks is focusing on its core appeal as a social meeting spot rather than joining a price war with fast-growing rival Luckin, which now operates more than 20,000 stores in China and recently opened outlets in New York.
Starbucks has cut prices for select non-coffee drinks and introduced more localized menu items to compete better. Comparable-store sales in China rose 2% in the quarter ending June 29, after flat growth the previous quarter.
Boyu plans to help Starbucks expand in smaller Chinese cities and improve store efficiency, according to a person familiar with the firm’s strategy.
Other Western companies have adopted similar models. In 2017, McDonald’s sold 80% of its China and Hong Kong business to investors including Citic for $2.1 billion — a partnership seen as largely successful.
“Boyu is more of a private equity firm; they will likely provide strategic support, relationships, and digital partnerships rather than state-backed advantages like Citic,” said Jason Yu, general manager at CTR Market Research.
Founded in 2010, Hong Kong-based Boyu has invested in major Chinese tech and consumer companies, including bubble tea chain Mixue Group and luxury retailer SKP.
Internationally, Starbucks faced severe backlash due to its support for Israel amid the ongoing genocidal war in Gaza, triggering a widespread boycott that significantly eroded its global sales.
The controversy stemmed from the company's public statements, union disputes labeled as pro-Israel, and reported donations to Israeli causes, which fueled accusations of complicity in the conflict.
Consumers across Muslim-majority countries, the Middle East, and solidarity movements worldwide shunned the brand, with protests and social media campaigns amplifying calls to #BoycottStarbucks.
This sustained pressure compounded existing competitive challenges in China, where declining market share and revenue losses from the boycott accelerated the need for a drastic restructuring, culminating in the $4 billion divestment to Boyu Capital.