CHINA / Foreign Media on China
Starbucks buys outlets in China
(Bloomberg News)
Updated: 2006-10-25 11:04
http://www.iht.com/articles/2006/10/24/bloomberg/sxstarbucks.php
Beijing - Starbucks, the world's biggest coffee-shop chain, said Tuesday
that it bought out a partner in more than 60 retail stores in China,
gaining more control of its brand as the US company prepares to
accelerate expansion in the nation.
Starbucks bought 90 percent of Beijing Mei Da Coffee, a licensee and
owner of stores in Beijing and nearby Tianjin, from H&Q Asia Pacific and
other owners, Starbucks said in a statement in Beijing. The purchase
price was not disclosed.
Starbucks aims to more than triple its outlets around the world to 40,000
to challenge Yum! Brands and McDonald's as the world's biggest restaurant
company. The acquisition will help the Seattle-based company improve
efficiency and accelerate expansion in China, the country expected to
become its biggest market abroad, Starbucks said.
Starbucks has 190 stores in 19 cities in Chinese mainland .
"It's a trend for foreign retailers to move from traditional
joint-venture partnerships to wholly-owned enterprises," said Paul
French, chief analyst of Access Asia Group, a Shanghai-based market
research company. "The purchase will enable Starbucks to control supply
chains and improve margins," French said in a phone interview.
"China will eventually be the largest international market," Martin
Coles, president of Starbucks Coffee International, told a press briefing
in Beijing. Starbucks has said it may ultimately have as many as 6,000 or
7,000 stores in the world's most populous nation.
Starbucks' global target, announced this month, supplanted the previous
goal of 30,000 stores. The company had 12,440 stores as of Oct. 1,
including 8,800 in the United States and 3,600 international locations.
Starbucks may exercise a right to increase its stake in a second venture,
which includes Uni-President Enterprises of Taiwan and covers about 100
outlets in Shanghai and surrounding cities, Coles said Tuesday.
Starbucks agreed in July 2003 to pay $21 million to buy 45 percent of the
Shanghai chain from President Chain Store and Uni-President, the
Taiwanese partners said then.
"We are now poised to expand rapidly in this important region two years
before the 2008 Beijing Olympics," Jin Long Wang, president of Starbucks
Greater China, said Tuesday.
But French questioned the company's strength in China.
"Many Chinese have been to Starbucks, but they're not regular coffee
drinkers," French said. "In the US, people buy takeout coffees, but most
Chinese stay in the shop so the turnover is not good."
Starbucks first talked to H&Q Asia Pacific in 2004 about exercising an
option to buy 45 percent of Mei Da Coffee, Hsu Ta-lin, chairman and
founder of H&Q Asia Pacific, said in Beijing on Tuesday. The company
later offered to buy 90 percent, Hsu said.
"We always have to look at an exit for investors, as we can't stay in
forever like strategic investors," Hsu said. "This is pretty opportune
time for us to exit," he said, adding that the fund involved was
approaching the end of its life and the return was "quite satisfactory."
H&Q, an Asia-focused private equity firm with offices across the region
and in Silicon Valley, started expanding the Starbucks business in 1999
from one store in Beijing, the statement said.
"The consumer product market looks robust, presenting a good opportunity
to exit investments by private equity firms," Vincent Pun, senior
research manager at Asian Venture Capital Journal in Hong Kong, said.
"H&Q probably made a good profit out of this deal because valuations of
the sector are increasing as the Olympic Games draw near."
Starbucks may get 18 percent of sales this year from overseas, up from 13
percent five years ago, Larry Miller, an analyst with RBC Capital
Markets, wrote in a research note last month.
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