Starbucks Set to Review Chinese Business Amid Pressure from Activist Elliott Investment Management

Bloomberg News reported that Starbucks Corp. is exploring options for its Chinese operations, including the possibility of selling a stake in the business, due to pressure from activist Elliott Investment Management.

According to people with knowledge of the matter, the coffee chain has been speaking to advisers about ways to grow its operations in China, potentially introducing a local partner and gauging interest from prospective investors. A stake sale could also attract interest from Chinese conglomerates or other local companies with experience in the industry, said the people.

Starbucks faces significant competition from local upstarts such as Luckin Coffee Inc., which is increasingly challenging their presence in the market. The company's Chief Executive Officer, Brian Niccol, has acknowledged that the competitive environment and macro environment are "extreme" and that Starbucks needs to find ways to expand in China.

In a statement, a spokesperson for Starbucks said that the company is committed to growing in China through strategic partnerships and exploring ways to improve its operations. However, no further details were provided on the plans.

Starbucks' Chinese operation was a significant contributor to the company's revenue, generating about $3 billion of net revenue last year alone. The company has 7,596 outlets in China, accounting for about 19% of its global total.

This move comes after previous Western chains, such as McDonald's and Yum! Brands Inc., have also carved out their Chinese operations and sold stakes to private equity firms to tap more growth and cater to local tastes. The sale of Starbucks' stake could see the company continue this trend, potentially attracting interest from investors who are willing to take on the challenges posed by the rapidly evolving market.

The news sent shockwaves through the market, with shares of Starbucks gaining about 2% this year, giving the company a market value of about $111 billion.