Starbucks is reportedly considering selling a majority stake in its China business, in a deal that could value the operation at up to $10 billion (€834 million). Investors aren’t surprised.
Once a prized growth engine, China has become a persistent headache. Sales have stalled, store expansion has slowed, and local rival Luckin Coffee now has nearly three times as many outlets.
Starbucks is just the latest western firm to feel the chill in China. A recent European Chamber of Commerce survey found that a record 73 per cent of European firms say operating in China has become harder. Just 38 per cent plan to expand – another record low.
China’s economic malaise is one reason. Deflation, falling wages and a troubled housing market have sapped consumer demand. Geopolitics is another, with EU and US firms risking collateral damage in escalating trade rows.
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Local competition is also biting. Luckin beat Starbucks by focusing on takeaway, deep discounts and slick digital ordering. BYD now outsells Tesla by offering localised features and a broader price range, allowing chief executive Wang Chuanfu to boast of “breaking the dominance of foreign brands”. Xiaomi built a global empire by mimicking Apple design at cut-rate prices.
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From EVs to espresso, domestic firms have learned to mimic global offerings, slash costs, add local flair and beat western giants at their own game.
For Starbucks, and for others, the dream of conquering China now looks more like a cautionary tale.
