China Stores, fully dominated by Startbucks in $1.3 billion agreement

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From Uni-President Enterprises and a subsidiary, Starbucks will dominate and will take the overall control of 1,300 shops in 25 cities, including commercial hub Shanghai. Moreover, mainland China outlets will be fully controlled by Starbucks in a $1.3 billion deal, the biggest single acquisition in the company’s history.

It will acquire the remaining 50 percent of its East China joint investment from Taiwan’s food and beverage giant Uni-President, according to a group statement issued Thursday.

Starbucks opened its first cafe 17 years ago and had seen a faster expansion in China. By 2011, the group had 400 outlets while today it has nearly 600 in Shanghai alone.

Kevin Johnson, Starbucks chief executive, described the progress as “a critical next step” that can help achieve its goal of almost doubling the number of its mainland outlets to 5,000 from the prevailing 2,800.

Johnson said, “Unifying the Starbucks business under a full company-operated structure in China reinforces our commitment to the market.”

Chairman Howard Schultz said that China could one day become the chain’s biggest market, passing the US where it has some 7,500 stores. For the third quarter ended on July 2, the move comes as the US coffee giant saw an 8.3 percent drop in net earnings for the year, to $691.6 million, according to its earnings report.

The entity plans to close 379 Teavana tea shops due to poor performance, it said.

The Seattle-based entity also said it would fully license its Taiwan market operations, selling 50 percent of its Taiwan joint enterprise President Starbucks Coffee for $175 million to Uni-President.

Macau and Hong Kong shops were fully licensed by Starbucks in 2011. Thus, By early 2018, the new deals are expected to be closed and are subject to regulatory approvals.