SEATTLE, Washington: Starbucks is handing majority control of its China business to private equity firm Boyu Capital in a deal that values the unit at US$4 billion, marking one of the most significant China divestments by a global consumer brand in years.

The move is part of a bold push to reignite growth in the world's second-largest economy, where the Seattle-based coffee giant faces fierce competition from fast-growing local chains like Luckin Coffee and Cotti Coffee, which sell lattes for as little as 9.9 yuan ($1.40)—less than a third of Starbucks' prices.

"We aim to bring the Starbucks experience to more customers, in more cities across China," said CEO Brian Niccol. "We see a path to grow from today's 8,000 Starbucks coffeehouses to more than 20,000 over time."

Under the terms of the agreement, Boyu Capital, whose founders include the grandson of former Chinese President Jiang Zemin, will own up to 60 percent of a new joint venture operating Starbucks' retail business in mainland China. Starbucks will retain a 40 percent stake and continue to license its brand and intellectual property to the venture.

The U.S. company said the total value of its China retail business, including proceeds from the sale, the value of its remaining ownership, and expected licensing income over the next decade, would exceed $13 billion. Starbucks shares rose three percent in after-hours trading.

Starbucks entered China in 1999, pioneering a coffee culture in a traditionally tea-drinking nation. But its dominance has eroded sharply in recent years: its market share fell to 14 percent in 2023, down from 34 percent in 2019, according to Euromonitor International.

Analysts say Starbucks will likely double down on its signature café experience and spaces for socializing and work rather than compete on price. "It would be a mistake for Starbucks to enter a price war with Luckin," said one retail analyst, noting that Luckin's low-cost, takeout-heavy model differs from Starbucks' sit-down approach.

Still, the company has made tactical adjustments. It has lowered prices on some beverages, localized its menu, and rolled out new products tailored to Chinese tastes. Comparable-store sales in China rose two percent in the quarter ending June 29, after stagnating earlier this year.

For Boyu, the partnership is an opportunity to expand Starbucks' footprint into China's smaller cities and make operations more efficient. "Boyu is more of a private equity firm than a state-owned enterprise like Citic," said Jason Yu, general manager at CTR Market Research. "They'll focus on strategic support, partnerships, and digital integration."

Other multinationals have pursued similar paths. McDonald's, for instance, sold 80 percent of its China and Hong Kong operations in 2017 to investors including Citic, a move widely seen as successful in accelerating store openings and adapting to local markets.

Founded in 2010, Hong Kong-based Boyu Capital made its mark investing in Chinese tech giants. However, it has recently expanded into the consumer space, taking stakes in brands such as Mixue Group, the bubble tea chain, and SKP, a luxury department store operator.