Starbucks is buying the rest of its East China joint venture in a US$1.3 billion transaction, marking the biggest deal ever for a company that sees China as a huge growth opportunity.
The Seattle-based coffee chain will acquire the remaining 50 per cent of the business from partners President Chain Store Corp and Uni-President Enterprises Corp. Starbucks also is divesting its 50 per cent stake in a separate joint venture in Taiwan, according to a statement on Thursday.
The move underscores Starbucks’ bet that China will be one of the company’s top sales drivers in coming years. It’s wagering that the nation’s growing middle class and urbanisation will give it a huge population of potential coffee drinkers to tap.
The deal mirrors the company’s strategy in Japan, where Starbucks entered the country with a joint venture, spent time learning the local market and then brought the business back in house, said Jennifer Bartashus, an analyst at Bloomberg Intelligence. In 2014, Starbucks agreed to buy out its Japanese joint venture with Sazaby League and other partners for about US$913.5 million.
“With the level of expectations they have for China, it isn’t really a surprise that they want to exert as much control over the stores as possible,” Bartashus said.
Starbucks plans to operate 5,000 cafes in mainland China by 2021, a goal it reaffirmed on Thursday. The company currently has 2,800 locations there.
The deal gives Starbucks 100 per cent ownership of about 1,300 cafes in Shanghai and in Jiangsu and Zhejiang provinces. In the Taiwanese transaction, its partners will acquire Starbucks operations in the territory for about US$175 million. The Starbucks business there, which was founded in 1997, has about 410 cafes.