AsianFin -- Global private equity giants Carlyle Group and EQT, together with regional heavyweights HongShan Capital Group (HSG) and Boyu Capital, have emerged as final contenders in the bidding process for a controlling stake in Starbucks’ China operations, according to five people familiar with the matter.
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The Seattle-based coffee chain has asked shortlisted firms to submit binding offers by early October, three of the sources said. A deal could be reached as early as the end of next month, one source added, though the structure and size of the stake remain under negotiation.
Starbucks had initially invited about 10 potential buyers to submit non-binding bids by early September. Most offers reportedly valued the China unit at up to $5 billion, according to a Reuters report last month.
Now, the competition has narrowed. Alongside Carlyle and EQT, Chinese private equity firms Boyu and HongShan—formerly known as Sequoia China—are preparing final bids. Primavera Capital, another major Chinese investor, is also expected to participate, though two sources said it would likely join forces with one of the four primary bidders.
While the company has decided to sell a controlling interest, it is expected to retain a significant minority stake, signaling Starbucks’ desire to remain invested in its largest overseas market. Two sources added that Starbucks plans to keep full ownership of its coffee bean roasting facility in China, citing quality control reasons.
The exact terms of the deal, including the final size of the stake for sale, have yet to be determined. “The structure is still fluid, but Starbucks wants to maintain a meaningful presence in the China business,” one source said.
Starbucks has declined to comment on the ongoing sale process. Carlyle, HSG, and Primavera also declined to comment, while EQT and Boyu did not immediately respond. Goldman Sachs, which is advising Starbucks, likewise declined to comment.
The sale comes as Starbucks grapples with slowing momentum in China, a market that accounts for more than a fifth of its global cafes. Once a runaway success story, the company has seen its market share eroded by aggressive domestic competitors.
According to Euromonitor International, Starbucks’ market share in China plummeted to 14% last year, down sharply from 34% in 2019. Rivals such as Luckin Coffee and Cotti Coffee have expanded rapidly with aggressive pricing strategies, localized menus, and broader delivery networks, luring away younger, value-conscious consumers.
To adapt, Starbucks has cut prices on selected non-coffee beverages and rolled out more localized products designed to appeal to Chinese tastes. The chain has also experimented with new store formats and digital innovations, including delivery partnerships, to strengthen customer engagement.
Recent performance has shown tentative improvement. Comparable-store sales in China grew 2% in the quarter ending June 29, following zero growth in the previous quarter. Analysts say the modest rebound may have bought Starbucks some time, but structural challenges remain.
Despite Starbucks’ competitive pressures, its China operations remain attractive to global and domestic investors. The business has strong brand recognition, a premium positioning, and a long runway for growth in a market where per capita coffee consumption still lags far behind Western countries.
Private equity firms are betting that with fresh capital, strategic adjustments, and localized management, Starbucks China could regain growth momentum. “The fundamentals of the China coffee market remain compelling, and Starbucks is still a leading player,” one person close to the talks said.
The bidding process also underscores a broader trend of global brands turning to private equity partners to navigate China’s increasingly competitive consumer landscape. By selling a controlling stake, Starbucks is signaling a willingness to share operational control while focusing resources on its global operations.
If successful, the transaction would represent one of the most significant private equity deals in China’s consumer sector this year, reflecting both the challenges and opportunities foreign brands face in the market.
For Starbucks, the sale may provide both capital and local expertise to stabilize its China business. For investors, it offers entry into a high-potential but increasingly complex market segment.
Whether the eventual buyer is a global giant like Carlyle or EQT, or a regional powerhouse such as HongShan or Boyu, the deal is expected to reshape Starbucks’ China strategy for years to come.
