Brian Nicol, chief executive of the Starbucks coffee chain, told the Financial Times in an interview published on Wednesday that the possibility of Starbucks selling a stake in its China business has “generated a lot of interest”.
The Seattle-based company has been struggling to revive sales in China, its second-largest market after the United States. Nicol said “people see the value of the Starbucks (NASDAQ:SBUX) brand,” adding that “they’re happy to work with us to explore” how to expand Starbucks’ store count in China from 8,000 to 20,000 stores.
Starbucks shares were little changed in pre-market trading in the United States on Wednesday.
Buyout groups KKR & Co (NYSE: KKR), PAG and Foutainvest Partners had previously expressed interest in acquiring a stake in Starbucks’ China business, Reuters reported in February, adding that a franchise sale would value Starbucks China at more than $1 billion. However, the exact size of the stake sale has not yet been determined.
Earlier this week, Starbucks announced that it would cut the price of some iced drinks in China by an average of 5 yuan (about 0.7 U.S. dollars) to cope with increasing competition. Starbucks announced on the social media platform WeChat that this means that some iced drinks will be sold for as low as 23 yuan.
Starting from Tuesday, Starbucks has introduced more “affordable” prices for a range of items, including non-coffee beverages and frappuccinos.
Starbucks has been working to attract price-sensitive Chinese customers who are concerned about sluggish economic activity and uncertain labor market prospects.
As large Internet giants such as Alibaba Group (NYSE: BABA) and JD.com enter the Chinese food delivery industry, Starbucks is also facing pressure from domestic competitors such as Luckin Coffee (OTC: LKNCY) and Cody Coffee, whose drinks are cheap. However, Starbucks stressed that it will not participate in a price war.
According to Reuters, citing a person close to Starbucks, Starbucks’ price cuts in China are not to cope with price competition, but to attract more customers to visit in the afternoon.
