Introduction:
When a 30-yuan (approx. USD 4.20) Starbucks coffee is forced to contemplate a “sell-off” due to Luckin’s 9.9-yuan (approx. USD 1.40) coffee, the war in China’s coffee market has reached a boiling point. In May 2025, rumors resurfaced about the sale of Starbucks’ China operations, with valuations exceeding several billion U.S. dollars. State-owned China Resources, Meituan, and major private equity firms are reportedly scrambling to bid. Is this a desperate act of survival, or a hidden play for a comeback?
From “Third Space” to “Sell-Off Rumors”: How Did Starbucks Get Here?
For the past decade, Starbucks in China has been synonymous with “premium,” “business,” and the idea of a “third space.” But now, these glories are being gradually dismantled by the low-price strategies of domestic brands.
Starbucks’ Q1 2025 financial report revealed that same-store sales in China fell by 6% year-on-year, and net profits shrank by 24%. In contrast, during the same period, Luckin surged ahead with 22,000 stores and USD 1.2 billion in revenue. What’s even more critical is that Starbucks’ long-held “rent discount privilege” is disappearing—shopping malls now prefer offering cheaper leases to brands like Luckin and M Stand, unwilling to continue paying for Starbucks’ “premium image.”
Even Starbucks’ once-prized strategy of penetrating lower-tier markets has hit resistance. Though half of its newly added stores in 2024 were in third-tier and below cities, its heavy-asset model has lengthened the payback cycle for each store. Meanwhile, brands like Mixue Bingcheng and Luckin have already built deep moats with 5-yuan (approx. USD 0.70) milk tea and 9.9-yuan coffee. As one industry insider put it: “Selling a 30-yuan coffee in a county town is like selling bottled water in the desert—it’s a necessity, but no one’s paying for it.”
Who’s Competing to Acquire Starbucks? A “Three-Kingdoms Battle” Among China Resources, Meituan, and Private Equity
This multi-billion-dollar capital battle has attracted three classes of close-combat contenders:
China Resources’ plan is to “break out using a shell.” As a retail giant holding thousands of supermarkets and commercial properties, China Resources could, by acquiring Starbucks, fill its gap in premium beverages and integrate Starbucks into CR Vanguard stores to create a “coffee + convenience store” combo. More aggressively, China Resources may replicate Yum China’s playbook—after Yum China went public independently in 2016, its valuation once exceeded USD 18 billion.
Meituan’s ambition is an “ecosystem loop.” In the local lifestyle space, Meituan’s war with Ele.me and Douyin has extended from food delivery into the coffee battlefield. If it acquires Starbucks, Meituan could make the “Starbucks Delivery” service exclusive, funnel its traffic of hundreds of millions of users into the Starbucks membership system, and even launch a “coffee version of Meituan membership” to directly counter Luckin’s 9.9-yuan strategy.
Private equity firms (like KKR, FountainVest, etc.) aim to replicate the “McDonald’s-style arbitrage.” In 2017, McDonald’s sold 80% of its China business to CITIC and Carlyle, only to buy it back at a high price six years later. The typical private equity play might be: slash 50% of Starbucks’ self-operated stores, switch to franchise, burn cash in a price war, and cash out once the valuation rises.
But the biggest variable in this deal lies in control. One insider close to the matter revealed: “Starbucks won’t easily relinquish dominance. Based on McDonald’s share repurchase move in 2023, this is likely a ‘retreat to advance’ capital game.”
If the Deal Goes Through, Three Major Shifts Will Hit the Chinese Coffee Market
- Supply Chain War Escalates
Starbucks’ coffee bean base in Yunnan and its intelligent industrial park in Kunshan—which increased logistics efficiency sixfold—are key bargaining chips. If China Resources or a private equity firm takes over, these assets might be opened to third parties, directly hitting Luckin and Cotti Coffee, which rely on imported beans. One analyst predicts: “If Starbucks drives down supply chain costs to 3 yuan per cup (approx. USD 0.42), Luckin’s 9.9-yuan price defense will collapse on its own.” - Lower-Tier Market Becomes a Meat Grinder
Starbucks has already entered 1,000 county-level markets in China, but over 55% of Mixue Bingcheng’s new stores are clustered there too. If China Resources aggressively pushes a “supermarket + Starbucks” combo into lower-tier markets, young people in small towns will face a brutal choice between a 15-yuan Starbucks (approx. USD 2.10) and a 5-yuan Mixue Bingcheng. Luckin, caught in the middle, might be forced to cut prices to 6.9 yuan (approx. USD 0.97). - Digital Disruption from Above
Starbucks’ alliances with Meituan and JD.com are already signaling its shift. In April, it launched on JD Delivery and integrated its membership system with Tencent’s ecosystem. One former Luckin employee remarked: “If Starbucks truly leans into digitalization, it’ll go even harder than Luckin.”
Conclusion: Is Selling Out the Endgame or the Start of a New War?
From Yum China to McDonald’s, the script for foreign giants—sell, then stage a comeback—has already been written. But Starbucks’ predicament reveals a harsher truth:
In China, there is no such thing as permanent “premium,” only permanent value-for-money. When Mixue Bingcheng wins over 900 million young people in small towns with 5-yuan lemon water, and Luckin drives its competitors crazy with 9.9-yuan coffee, Starbucks’ stubborn grip on the outdated “third space” dream may doom it—even if capital injections arrive.
Perhaps the real winner in this entire deal won’t be Starbucks, nor China Resources or Meituan—but Chinese consumers. After all, who could say no to the epic spectacle of “Starbucks forced to lower prices”?
(Data sources: Starbucks 2025 Q2 financial report, Luckin 2025 Q1 financial report)
[Disclaimer]: The above content reflects analysis of publicly available information, expert insights, and BCC research. It does not constitute investment advice. BCC is not responsible for any losses resulting from reliance on the views expressed herein. Investors should exercise caution.