Starbucks announced it will sell control of its China business to Hong Kong-based Boyu Capital in a deal valuing the operations at $4 billion.
The transaction represents one of the largest divestments of a China unit by a global consumer company in recent years.
Under the agreement, Boyu will acquire up to 60 percent of a new joint venture, while Starbucks retains 40 percent and continues licensing its brand and intellectual property.
The U.S. company expects the total value from the sale, its retained stake, and licensing income over at least the next decade to exceed $13 billion.
Starbucks entered China in 1999 and pioneered the modern coffee market there.
Its market share has declined to 14 percent last year from 34 percent in 2019, according to Euromonitor International data.
Local competitors like Luckin Coffee, with over 20,000 stores mostly in China, and Cotti Coffee offer drinks at significantly lower prices, such as lattes for 9.9 yuan compared to Starbucks' higher pricing.
The company plans to grow from 8,000 stores to more than 20,000, targeting lower-tier cities with Boyu's assistance in cost efficiency and expansion.
Starbucks CEO Brian Niccol said in a statemen:
We aim to bring the Starbucks experience to more customers, in more cities across China. We see a path to grow from today's 8,000 Starbucks coffeehouses to more than 20,000 over time.
Luckin focuses on take-away and delivery, recently opening stores in New York.
Starbucks has introduced localized products, cut prices on some non-coffee items, and reported 2 percent comparable-store sales growth in China for the quarter ended June 29.
Boyu, founded in 2010 with investments in tech and consumer firms like Mixue Group, will provide strategic support, relationships, and digital partnerships.
Similar moves include McDonald's 2017 sale of 80 percent of its China and Hong Kong operations to Citic for $2.1 billion, leading to expanded outlets.
Starbucks shares rose 3 percent in after-hours trading following the announcement.