Starbucks to own all China outlets in biggest ever buyout deal

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Starbucks is set to own 100 percent of its China branches after striking a deal to buy out its joint venture partner for 1.3 billion US dollars.

The deal will see the coffee giant acquire the 50 percent stake it doesn’t yet own in more than 1,000 stores in Shanghai, as well as Jiangsu and Zhejiang provinces.

Starbucks already fully owns its other 1,500 branches in China.

The announcement comes after new chief executive, Kevin Johnson, said Starbucks was making long-term investment in China amid worries that growth at home was cooling.

“We think it’s a prudent thing to do,” Johnson told Reuters.

Starbucks' Chief Executive Kevin Johnson speaking in Seattle. /AFP Photo

Johnson, who took over from co-founder Howard Schultz in April, has the difficult task of finding new ways to deliver growth that Wall Street demands.

This mandate was underscored on Thursday when the Seattle-based company posted quarterly profits that just matched analysts’ estimates.

The financial report, the first under Johnson’s stewardship, came just hours after the company announced it would buy out the remaining 50 percent stake in its eastern China businesses.

Sales at Starbucks branches in the US that have been open at least 13 months rose 5 percent in the last quarter.

And traffic turned slightly positive after three consecutive quarters of decline, which the company said was caused by changes to its loyalty program which now focuses on dollars spent rather than purchases made.

Inevitable or unthinkable? A Starbucks branch in Beijing's Forbidden City. /AFP Photo

But it’s a different picture in China where sales were up a healthy seven percent in the last quarter.

The more than 16,000 Starbucks branches in the Americas generated 974.8 million US dollars in income last quarter.

In contrast, the 7,183 cafes in the Asia-Pacific region posted 223.8 million US dollars in the same period.

“Starbucks’ opportunity for growth in China is unparalleled,” Johnson said, “And we are just getting started.”

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