BEIJING (BLOOMBERG) - Starbucks Corp is buying the rest of its East China joint venture in a US$1.3 billion (S$1.8 billion) transaction, marking the biggest deal ever for a company that sees China as a huge growth opportunity.
The Seattle-based coffee chain will acquire the remaining 50 per cent of the business from partners President Chain Store Corp and Uni-President Enterprises Corp. Starbucks also is divesting its 50 per cent stake in a separate joint venture in Taiwan, according to a statement on Thursday (July 27).
The move underscores Starbucks' bet that China will be one of the company's top sales drivers in coming years. It is wagering that the nation's growing middle class and urbanisation will give it a huge population of potential coffee drinkers to tap.
"Unifying the Starbucks business under a full company-operated structure in China reinforces our commitment to the market and is a firm demonstration of our confidence in the current local leadership team," chief executive officer Kevin Johnson said in the statement.
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Starbucks plans to operate 5,000 cafes in the country by 2021, a goal it reaffirmed on Thursday. The company currently has 2,800 locations in China.
The deal gives Starbucks 100 per cent ownership of about 1,300 cafes in Shanghai and the Jiangsu and Zhejiang provinces. In the Taiwanese transaction, its partners will acquire Starbucks operations in the territory for about US$175 million. That business, which was founded in 1997, has about 410 cafes.
China is the company's fastest-growing market outside the United States. With full control of the local operations, Starbucks can enhance the coffee and in-store experience, said its China CEO Belinda Wong.
It also plans to rely more on technology in the country. Starbucks' mobile-ordering app has been key to locking in customers in the US.
The Chinese transaction follows a similar deal in Japan. In 2014, it agreed to buy out its joint venture with Sazaby League and other partners for about US$913.5 million.