Starbucks faces fierce competition in the market of over a billion people.

Starbucks recently made a surprise announcement that it is selling a controlling stake in its retail operations in China.

A Starbucks store in Shanghai, China. Photo credit: THX/VNA

Following its rapid growth, this move highlights the fierce competition Starbucks is facing in the world 's second-largest market.

Starbucks has decided to sell its stake in China to investment firm Boyu Capital, in a deal valued at approximately $4 billion. Under the agreement, Boyu will hold 60% of the new joint venture, while the Seattle-based parent company will retain 40% and continue to own the brand and intellectual property rights.

Previously, Starbucks had set a goal of more than doubling its number of stores in China, from the current 8,000 to over 20,000 in the next decade, with projected total revenue in this massive market exceeding $13 billion. Explaining the unexpected decision to divest amidst its accelerating expansion strategy, Starbucks stated that the strategic partnership with Boyu, after a year of searching for a partner, would help the American coffee brand achieve its goals sooner.

Jin Lu, a public relations expert who has worked with numerous multinational brands in China such as PepsiCo and McKinsey, believes that Starbucks' decision to divest reflects a loose business strategy, a fiercely competitive retail environment, and a Chinese consumer preference for domestic brands.

Nearly three decades ago, Starbucks opened its first store in China, welcoming eager customers to try cappuccinos brewed in steaming espresso machines. The American brand's impressive presence helped ignite a coffee culture among the burgeoning middle class of a nation traditionally accustomed to drinking tea.

But the Chinese market today is not the same as it was 26 years ago, when dozens of cheap beverage chains sprung up, making the domestic market fiercely competitive. Meanwhile, economic difficulties have led consumers to tighten their spending, not to mention a segment of young people increasingly favoring "made in China" brands.

Starbucks' biggest competitor is Luckin Coffee. In less than a decade since its inception, Luckin Coffee has grown to over 26,200 stores in Asia, surpassing Starbucks and becoming the largest coffee chain in China by 2023. Luckin Coffee has overtaken Starbucks in both sales and number of stores, boasting three times the number of outlets and offering coffee at approximately one-third the price.

The problems arising in China are also what Starbucks faces in the global market, including in its "home turf." Rival Luckin Coffee entered the US market this past summer by opening five stores in New York in less than four months.

In this fierce competition, Starbucks was forced to take strategic steps to turn the tide: planning to close hundreds of stores in the US and Canada. After a year of implementing the restructuring program, Starbucks' revenue in fiscal year 2025 increased by 3%, but same-store sales decreased by 1%.

However, according to analyst Dan Su at the US financial services firm Morningstar, Starbucks' new LVH3 joint venture, despite facing "tough battles" ahead, could strengthen its competitiveness by partnering with a local company. In this context, Starbucks needs to innovate its menu and undergo digital transformation to regain its position against domestic coffee, tea, and beverage chains in China.

Source: https://baotintuc.vn/kinh-te/starbucks-canh-tranh-khoc-liet-tai-thi-truong-ty-dan-20251119131402019.htm