Starbucks’ once unassailable China playbook is now under intense scrutiny, with investors warning that the coffee giant’s Chinese business may no longer justify premium valuations in the face of accelerating local competition.
Multiple private equity firms — including Hillhouse Capital, Carlyle Group, Centurium Capital, and KKR — have reportedly placed bids for a minority stake in Starbucks China, valuing the operation between $6 billion and $10 billion. The wide valuation range underscores the uncertainty among financial players about the company’s true worth in a fast-changing market.
What was once Starbucks’ most promising international growth engine is now being viewed through a more cautious lens. Though the company operates nearly 7,800 stores in China, its profitability has lagged, accounting for just 7% of operating income compared to 9% of global revenue. At the same time, local coffee and tea rivals like Luckin Coffee, Cotti, and Mixue Bingcheng have grown exponentially by capturing price-conscious consumers with app-centric promotions and faster service.
Starbucks has begun slashing prices in some markets — a stark departure from its premium branding strategy. This pivot signals growing pressure to retain relevance in China’s rapidly evolving consumer landscape.
“Investors are no longer viewing Starbucks China as a golden goose,” said Eugene Kim, an emerging markets strategist at Asia Pacific Ventures. “There’s a real debate about whether the company’s historical brand power can keep pace with agile, digitally native local rivals.”
In response to mounting challenges, Starbucks is reportedly considering adopting a joint venture-style approach — potentially following McDonald’s 2017 China model, which brought in local partners to drive operations while retaining strategic oversight. CEO Laxman Narasimhan has signaled that any deal would ensure Starbucks retains a “meaningful presence” in China while allowing a local ally to navigate operational complexities.
Still, Wall Street remains watchful. While private equity interest demonstrates confidence in long-term potential, the diverging valuations suggest risk has finally caught up with Starbucks’ China ambitions.
