Starbucks CEO Confirms 'A Lot Of Interest' In Potential China Stake Sale, Admits 'Pricing Architecture' For Non-Coffee Drinks Needs Fixing - Starbucks (NASDAQ:SBUX)

Starbucks Corp. SBUX is considering selling a minority stake in its China business to an outside investor as part of efforts to reinvigorate growth in the region, according to the company's CEO.

What Happened: Starbucks’ CEO, Brian Niccol, revealed in an interview with the Financial Times that the company is considering selling a minority stake in its China unit, which currently operates 7,758 stores. Potential investors are showing ‘a lot of interest’ as they recognize the strength of the Starbucks brand and the expanding coffee market in China, as per Niccol.

Despite Starbucks’ ambitious goal of establishing 9,000 stores in China by 2025, the region has seen a decline in revenue from $3.7 billion in 2021 to $3 billion in 2024. This drop has occurred despite the company’s expansion of new stores and is attributed to the rise of lower-priced domestic competitors like Luckin Coffee and Cotti Coffee and a weaker economic environment.

The company aims to be more competitive in the non-coffee market, which has seen significant growth, especially with the rise of bubble and milk tea brands. "The strategy in China is we want to be more competitive," stated the CEO. He also noted that the company needs to work on its "pricing architecture" for non-coffee beverages.

Why It Matters: Mainland China has grown into Starbucks' second-largest market since its 1999 entry, playing a key role in the company's global expansion as it banks on rising demand for specialty coffee among the middle class. However, the company’s decision to explore a potential stake sale in its China business comes amid growing challenges in China, its second-largest market, as competitors gain a significant market share.

The coffee giant has also been adjusting its pricing to maintain its foothold in the Chinese market, amid rising competition and cautious consumer behavior. This includes cutting prices on select iced beverages and expanding into non-coffee items.

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These moves follow warnings from analysts about Starbucks’ growing risks from competition, costs, and global tensions. The potential stake sale could be a strategic move to mitigate these risks and secure the company’s future in the Chinese market.

According to Benzinga Edge Stock Rankings, Starbucks has a growth score of 36.62% and a momentum rating of 57.33%. Click here to see how it compares to other leading consumer discretionary companies.

Over the past month, Starbucks stock climbed 6.72%, according to data from Benzinga Pro.