Star­bucks grabs full con­trol of main­land stores in $1.3 bil­lion deal

China Daily (Hong Kong) - - BUSINESS - By WANG ZHUOQIONG wangzhuo­qiong@ chi­nadaily.com.cn

Star­bucks Corp an­nounced on Thurs­day it is tak­ing full con­trol of its main­land out­lets af­ter a buy­out deal to ac­quire the re­main­ing 50 per­cent share it did not own from its long time joint ven­ture part­ners.

The Seat­tle-based cof­fee shop chain said it bought the half share from UniPres­i­dent En­ter­prises Corp and Pres­i­dent Chain Store Corp for about $1.3 bil­lion in cash.

The cof­fee be­he­moth said the trans­ac­tion was its big­gest sin­gle ac­qui­si­tion.

Star­bucks will in­crease its stake from 50 per­cent to 100 per­cent own­er­ship in 1,300 Star­bucks stores in Shang­hai, Jiangsu and Zhe­jiang prov­inces.

The cof­fee gi­ant al­ready fully owns an­other 1,500 stores in the main­land, which out­side the United States is its quick­est-ex­pand­ing mar­ket. Top 3 cof­fee shop chains in China and their mar­ket shares

As part of the deal, UPEC and PCSC will ac­quire Star­bucks’ half share in Pres­i­dent Star­bucks Cof­fee Tai­wan Ltd and as­sume 100 per­cent own­er­ship of Star­bucks op­er­a­tions in Tai­wan of China for about $175 mil­lion. Founded in 1997, the joint ven­ture op­er­ates about 410 Star­bucks stores there.

Star­bucks CEO Kevin John­son said the ac­qui­si­tion to stream­line its busi­ness struc­ture was a demon­stra­tion of the com­pany’s con­fi­dence in its aim to grow from 2,800 stores to more than 5,000 main­land out­lets by 2021.

“East China is a sig­nif­i­cant and strate­gic re­gion for Star­bucks in China, with Shang­hai con­tain­ing nearly 600 stores, the largest num­ber of stores glob­ally in any city where Star­bucks has a pres­ence,” the com­pany said.

In De­cem­ber, Shang­hai will also be­come the first city out­side of the United States to open a cof­fee roast­ery and tast­ing room. It opened its first such fa­cil­ity, a 15,000 square foot out­let, in late 2014, where roast­ing baris­tas pre­pare lim­ited-sup­ply re­serve cof­fees us­ing var­i­ous spe­cial­ist meth­ods, and charge pre­mium prices to cus­tomers.

Star­bucks has dom­i­nant mar­ket share in the Chi­nese mar­ket, which in­creased from 60.5 per­cent in 2012 to 74.6 per­cent in 2016. The mar­ket share of sec­ond player, Mc­Don­ald’s Corp, was only 9.1 per­cent in 2016 while Whit­bread Plc’s Costa had 8.4 per­cent, ac­cord­ing to Euromon­i­tor In­ter­na­tional.

The lat­est move has built on the com­pany’s on­go­ing investments in China, its fastest-grow­ing mar­ket out­side the US in terms of store count.

“This is the be­gin­ning of yet an­other ex­cit­ing new chap­ter for Star­bucks in China,” said Belinda Wong, CEO, Star­bucks China.

“Full own­er­ship will give us the op­por­tu­nity to fully lever­age our ro­bust busi­ness in­fra­struc­ture to de­liver an el­e­vated cof­fee, in-store ex­pe­ri­ence and dig­i­tal in­no­va­tion to our cus­tomers, and fur­ther strengthen the ca­reer de­vel­op­ment op­por­tu­ni­ties for our peo­ple,” she added.

Both trans­ac­tions are ex­pected to close early in 2018 and are sub­ject to cus­tom­ary clos­ing con­di­tions, in­clud­ing re­ceipt of re­quired reg­u­la­tory ap­proval.

Ja­son Yu, gen­eral man­ager of Kan­tar World­panel China, said a uni­fied own­er­ship struc­ture will help Star­bucks to ac­cel­er­ate its mar­ket de­vel­op­ment and fran­chise ex­pan­sion, as a re­sult of a faster de­ci­sion-mak­ing process and a sin­gle strat­egy.

ZHANG WEI / CHINA DAILY

Pedes­tri­ans walk past a Star­bucks cof­fee shop in down­town Bei­jing.

Star­bucks Corp

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