Starbucks brews full ownership deal

PUBLISHED : Friday, 03 June, 2011, 12:00am
UPDATED : Friday, 03 June, 2011, 12:00am


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Starbucks, the world's largest coffee shop chain operator, has reached an agreement with long-time jointventure partner Maxim's Caterers to take full control of more than half of its retail stores on the mainland.

As part of that deal, Maxim's acquired Starbucks' remaining stake in its business in Hong Kong and Macau, assuming 100 per cent equity in those markets.

The financial terms of the deal were not disclosed.

'Full ownership of our stores in central, south and western China is part of our broader strategy to build China as our second home market outside of the US and allows us to accelerate growth as we look to achieve our goal of having 1,500 stores across the country by 2015,' John Culver, the president of Starbucks Coffee International, said yesterday.

The mainland markets covered by its agreement with Maxim's include the provinces of Guangdong, Hainan, Sichuan, Shaanxi and Hubei, as well as the municipality of Chongqing.

Starbucks, which posted a 10 per cent increase in global revenue to US$2.8 billion in its fiscal second quarter ended April 3, operates in 35 cities across the mainland, many of which are the so-called second- and third-tier cities with populations of more than one million. It had about 450 stores on the mainland as of last month.

In a conference call with analysts last month, chairman and chief executive Howard Schultz described Starbucks as ideally positioned 'to profitably grow its store presence across dozens, if not hundreds, of cities throughout China in the quarters and years ahead'.

The company opened its first store on the mainland, in Beijing, in January 1999 through a licensing agreement with Mei Da Coffee.

'With urbanisation under way, the Chinese government is projecting that there will be over 500 cities with a population over one million people within the next five years,' Schultz said. 'All of this suggests that these are very early days for Starbucks in China as we build trust while moving quickly but conscientiously with local relevance, and above all, with respect to the Chinese consumer and the Chinese culture.'

Competition is expected to heat up for Starbucks, as Hong Kong-listed China Resources Enterprise announced in October a plan to open as many as 1,000 Pacific Coffee outlets across the mainland.

Starbucks, which operates in more than 50 countries and had over 17,000 stores as of January, opened its first shop in Hong Kong in May 2000 at Exchange Square in Central, through its joint venture with Maxim's. There are now more than 110 Starbucks stores in the city and Macau. Based on its 11-year partnership with Maxim's, Starbucks expected to continue expanding its business in Hong Kong and Macau, Culver said.

Founded in 1956, Maxim's has developed into the largest catering company in Hong Kong. It operates 650 outlets and serves more than 540,000 people every day. Its mooncake creations have been the No1 seller in Hong Kong since 1998.


The company's profit per store on the mainland

- Starbucks aims to have 1,500 mainland shops by 2015