Starbucks buys back its eastern China operation in record deal

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock

Related tags Coffee

In the biggest single transaction in its history, Starbucks’ American parent has bought up the remaining shares in its eastern China joint-venture. The deal now brings all stores in the country under its control.

The US$1.3bn cash deal brings some 1,300 coffee shops in Shanghai, Jiangsu and Zhejiang under the full control of Starbucks’ Seattle headquarters.

Long-term joint-venture partners Uni-President Enterprises and President Chain Store Corporation ceded their 50% stake in the business to Starbucks, which plans to build on its ongoing investments in China, its fastest-growing market outside America.

In a separate deal, the two former joint-venture partners will acquire Starbucks’ 50% interest in a Taiwan joint-venture for approximately US$175m, giving them full control of around 410 stores on the island.

Kevin Johnson, president and chief executive of Starbucks Coffee Company, said the move demonstrates the American chain’s “confidence in the current local leadership team​” as it sets out to increase its Chinese store count from 2,800 to 5,000 by 2021.

Similar to our decision in 2011 to fully license our Hong Kong and Macau market operations, we are pleased to transition our business in Taiwan to our long-time partners​. 

This is a critical next-step as we advance our multifaceted China growth strategy for long-term profitable growth in Asia​,” Johnson added. 

With Shanghai alone being home to almost 600 stores—the most for Starbucks in any city—the east China joint-venture has been hugely strategic for the company during a period of rapid expansion in the Far East.

Now under full American ownership, the Chinese operation will be easier to co-ordinate as a single entity as Starbucks brings formats such as its ultra-premium Starbucks Reserve roastery to Shanghai—its first location outside America. 

This focus on countries outside its home market comes as concerns simmer over slowing growth in America.

In recently announced third-quarter figures, China sales rose 7%. This prompted Johnson to admit that the opportunity for the company there is even greater than he had previously thought.

The former joint-venture partners have had a “strong friendship​” with Starbucks for almost 20 years, since they opened a first store in Taipei before extending the business to east China, said Alex Lo, chairman of Uni-President Enterprises, the biggest food and beverage manufacturer in Taiwan.

Owned by Uni-President, President Chain Store is the biggest convenience store operator in Taiwan, with more than 5,100 7-Eleven outlets and interests across the Far East.

Both transactions are expected to close by early 2018 and are subject regulatory approvals.

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