Starbucks, once the dominant name in China’s premium coffee market, is now navigating a rapidly shifting landscape where local competitors are winning over price-sensitive and convenience-driven consumers.
Once hailed as a status symbol for middle-class Chinese consumers, Starbucks is now contending with an erosion of market dominance. Its share of China’s coffee market has plummeted from 34% in 2019 to just 14%, as homegrown brands like Luckin Coffee, Mixue, Heytea, and Cotti rapidly scale with low-cost offerings and app-based delivery systems.
In a marked shift, Starbucks has rolled out its first-ever price cuts in China—an acknowledgment that its premium positioning is no longer a guaranteed advantage. Yet, the damage may already be done. With nearly 7,800 stores across China, the country accounts for 9% of Starbucks’ global revenue and only 7% of operating profits—an imbalance that’s drawing investor scrutiny.
The company is now reportedly exploring the sale of a minority stake in its China operations, with suitors valuing the unit at between $6 billion and $10 billion. Interested bidders include private equity giants such as Hillhouse Capital, Carlyle Group, Centurium, and KKR, according to sources familiar with the matter.
Analysts believe the stake sale could allow Starbucks to recalibrate its strategy in China—potentially emulating McDonald’s playbook, which partnered with local investors in 2017 and successfully adapted to the market.
“Chinese consumers are redefining value—not just in terms of price, but speed, digital experience, and localization,” said Tina Zhou, a retail analyst based in Beijing. “Starbucks needs more than store openings—it needs cultural fluency and pricing agility.”
Starbucks CEO Laxman Narasimhan has confirmed the brand’s intent to retain a meaningful stake while leveraging a local partner to navigate the complexities of the Chinese market. However, investors remain cautious. With growth slowing and local chains expanding aggressively, the question remains whether Starbucks can reestablish relevance in one of its most important international markets.
