Starbucks Corp. has announced a sweeping strategic restructuring of its China operations, agreeing to sell a majority stake in its retail business to private equity powerhouse Boyu Capital for $4 billion. The deal is designed to reignite Starbucks’ performance in the world’s second-largest economy, where shifting consumer habits and intensifying competition have challenged its dominance.

Under the joint venture agreement, Boyu Capital will acquire a 60% stake in Starbucks’ retail operations across China, while the Seattle-based coffee giant retains 40% ownership and continues to license its brand and intellectual property. This transaction marks the culmination of Starbucks’ months-long search for a strategic partner to drive growth in a market that has long been pivotal to its global ambitions. Since opening its first Beijing store in 1999, Starbucks has expanded to more than 8,000 outlets across China.

In recent years, Starbucks has struggled to maintain its market edge amid a surge of consumer nationalism and price-sensitive preferences. Domestic rival Luckin Coffee, headquartered in Xiamen, has eclipsed Starbucks as China’s largest coffee chain by offering lower-cost beverages and leveraging aggressive digital promotions. The traditional Starbucks store model — once a hallmark of aspirational consumerism has become harder to sustain as economic headwinds and post-pandemic caution curb spending on premium products.

Boyu Capital, founded in 2011 and headquartered in the Cayman Islands, emerged as the frontrunner among five bidders for the stake. The firm’s extensive portfolio includes investments across technology, consumer goods, and renewable energy sectors, positioning it as a strategic ally for Starbucks’ future in Asia. Boyu’s deep ties to the Chinese retail ecosystem and regulatory environment are expected to provide Starbucks with both stability and local insight as it navigates the evolving market.

Despite its recent setbacks, Starbucks remains bullish on long-term growth in China. Chief Executive Officer Brian Niccol reaffirmed this confidence in a company blog post, stating, “We see a path to grow from today’s 8,000 Starbucks coffeehouses to more than 20,000 over time.” The company’s latest earnings report reflected early signs of recovery, with comparable store sales in China climbing 2% in Q4, its first positive growth in over a year. Starbucks estimates the total valuation of its China retail operations, including licensing, to exceed $13 billion.

In a bid to reconnect with local consumers, Starbucks has introduced a series of localized strategies under the leadership of China head Molly Liu. These include the launch of free “study rooms” in select locations, expanded tea-based and sugar-free beverage options, and more flexible customization choices, a marked departure from the streamlined approach used in the U.S. market. Early investor reactions were cautiously optimistic: Starbucks’ shares rose modestly by less than 1% in after-hours trading following the announcement, though the stock remains down 11% year-to-date, compared to a 17% rise in the S&P 500 Index.