Starbucks late Monday announced it’s entered an agreement to form a joint venture with Boyu Capital, an alternative investment firm with more than 200 portfolio companies, to operate Starbucks retail in China. Under the deal, Boyu will hold an up to 60 percent interest in Starbucks’ business there. Starbucks will retain the balance and continue to own and license the brand and intellectual property to the new entity.
Boyu will acquire its interest based on a cash-free, debt-free enterprise value of about $4 billion.
Starbucks said it expects the total value of its China retail business to exceed $13 billion inclusive of three sources—proceeds from the sale of a controlling interest in the joint venture to Boyu, the value of Starbucks’ retained interest in the joint venture, and the net present value of ongoing licensing economics payable to Starbucks over the coming decade or longer. That represents more than 4X Starbucks’ China’s fiscal 2025 sales.
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The business will continue to be based in Shanghai and own and operate the 8,000 Starbucks units across the market, with a goal to reach as many as 20,000.
Starbucks, which has been in China for 26 years, saw its market same-store sales increase 2 percent in Q4, driven by a 9 percent lift in comparable transactions (traffic), partially offset by a 7 percent decline in average ticket.
“Boyu’s deep local knowledge and expertise will help accelerate our growth in China, especially as we expand into smaller cities and new regions,” CEO Brian Niccol said in a statement. “We’ve found a partner who shares our commitment to a great partner experience and world-class customer service. Together we will write the next chapter of Starbucks storied history in China.”
Starbucks spent roughly 18 months pursuing options for the China arm of its business. The deal is expected to close in Q2 2026 (March). Although Starbucks has not broken out China profitability in recent years, William Blair estimated the business has an operating margin about 400 basis points higher than the company’s international segment. That translates into 2025 operating profit of roughly $500 million.
William Blair said, with cash of $3.7 billion and free cash flow of more than $2 billion this past fiscal year, the rationale for the transaction is not Starbucks’ need for capital. “Instead, the hope is that fresh insight will help propel Starbucks China from sales inertia over the past four years [about $3 billion in sales annually since fiscal 2022]. Plans include accelerating innovation across beverages and digital platforms while more than doubling the store base to as many as 20,000 locations over time through a push into smaller cities and new markets,” analyst Sharon Zackfia wrote.
William Blair figures the transaction will likely be neutral to modestly dilutive to Starbucks at the outset. It expects the loss of 60 percent of Starbucks China profits to largely be offset by royalties related to the 60 percent of the business Starbucks does not own and interest on the cash paid.
“Starbucks has built an iconic brand and a deep connection with Chinese consumers over the past 26 years. This partnership reflects our shared belief in the enduring strength of that brand and the opportunity to bring even greater innovation and local relevance to customers across China. Together, we aim to combine Starbucks global coffee leadership with Boyu’s deep market insights and expertise to accelerate growth and create exceptional experiences for millions of customers,” added Alex Wong, partner, Boyu Capital.
Continued Molly Liu, executive vice president and chief executive officer, Starbucks China: “Building on our positive business momentum, our partnership with Boyu will enable Starbucks China to fully unlock the vast market opportunity. Together, we will deliver exceptional coffee experiences to more Chinese consumers than ever before, create greater career opportunities for our green apron partners, and drive the future of China’s specialty coffee industry. This collaboration is a powerful commitment to our next chapter of growth.”
