A man walks past a Starbucks store housed in a traditional-style Chinese building in Chongqing, a sprawling metropolis. Cheng Xin/Getty Images
As stated by CNN
Beijing/Hong Kong –
More than three decades ago, Starbucks opened its first store in China with a lavish ceremony: the traditional “golden-maned lion” dance and the desire to taste cappuccino brewed on a steam espresso machine. The entry of this American chain supported the growth of coffee culture among the rising middle class and quickly made Starbucks a symbol of Western influence in rapidly growing China.
At one point, the Seattle-based company opened a new store almost every 15 hours in China, using the country’s economic upswing as a catalyst for its global strategy – and the market became a key element of Starbucks’ long-term global concept.
But times have changed: on Monday the company announced the sale of a controlling stake in its China operations to a Chinese investment firm.
Under the deal, Boyu Capital will hold up to 60% interest in Starbucks’ retail operations in China, which number over 8,000 locations, while the company will retain a minority 40% stake and will continue licensing the Starbucks brand and intellectual property to the new structure.
For customers at a prestigious mall in central Beijing, where the company first opened its doors in China in 1999, the news was not entirely unexpected.
“When Starbucks first appeared in China, it positioned itself as an accessible luxury that everyone could enjoy.”
Competitors Shaping the Landscape
Industry challenges in China are not limited to internal competition but also reflect shifts in consumer preferences, where younger generations favor national brands and more economical options.
On the eve of this move, Starbucks faced a surge of local beverage chains, notably Luckin Coffee, which overtook Starbucks in the number of stores and sales, offering coffee at substantially lower prices.
Luckin had developed just a few years after its founding in 2017, attracted the country’s younger generation, and is now testing Starbucks on their home turf – during openings in New York in June.
The market today is driven by a different dynamic: Mixue Bingcheng, ChaGee and HeyTea are rising as the main players in the beverages segment, offering tea and coffee at affordable prices. Mixue has become a global leader in the number of network points in the food and beverage space, offering various coffee options priced from 2 to 8 yuan; Boyu Capital supported Mixue during their IPO this year.
Meanwhile, ChaGee and HeyTea are targeting the dynamic tastes of young Chinese consumers, offering unique tea and tea-coffee beverages with cheese foam.
Although Starbucks remains attractive thanks to its atmosphere and the sense of a “premium brand,” many consumers find the prices too high compared with other chains such as McDonald’s or Dunkin’.
“Usually I drink Luckin, because Starbucks is too expensive.”
“A cup of Starbucks costs me so much that I could buy three to four cups of Luckin.”
Prospects and the Future
Analysts say that exiting the Chinese market could be part of a long-term strategy aimed at adapting to rising price competition and promoting local brands. Alongside the partnership with a Chinese company, this could open a new growth phase in the world’s most important foreign market.
Experts estimate the company could increase the number of coffee shops from the current around 8,000 to over 20,000 in the future.
The projected total value of Starbucks’ retail business in China could exceed $13 billion, underscoring the seriousness of plans for the future and adaptation to local conditions.
Speculation about the future of the brand is already surfacing in the Chinese market: consumers are actively discussing the advantages of local players, notably Luckin’s affordability compared with Starbucks.
In sum, experts note that the situation in the Chinese market remains dynamic – competition between the global brand and local players could lead to new formats and pricing strategies in the future.
