(Yicai) Nov. 14 -- The plans of global chains such as Starbucks and Burger King to sell majority stakes of their China business reflect deeper localization efforts and increasingly fierce market competition -- not a withdrawal, according to experts.

Huang Feng, president of the Shanghai Foreign Investment Association, said these brands are not exiting China but adjusting their operating models. By transferring operating and expansion authority to local teams and adopting asset-light strategies that reduce cross-border management costs, foreign brands aim to achieve full-chain localization -- spanning capital, operations, and talent -- a trend likely to grow among multinationals.

Global coffee and fast-food chains Starbucks and Burger King recently announced plans to sell majority stakes in their China operations, sparking debate over whether foreign consumer brands are collectively “offloading” their China businesses.

“These foreign brands have underperformed in recent years, with many seeing stalled expansion or shrinking profits,” said Zhan Yubo, director at the Institute of Economics, Shanghai Academy of Social Sciences. The main reason, he explained, is intensified competition to which these companies have struggled to respond effectively. But he noted that not all foreign consumer brands face such difficulties.

Chains such as Aldi and Walmart’s Sam’s Club continue to expand quickly in China. “Ultimately, success hinges on whether foreign companies can adapt to the evolving trends and competitive landscape of China’s consumer market.”

Zhan added that intensifying competition is structural and affects all market participants, not just foreign firms. In earlier years, foreign brands could attract large customer bases by offering products and experiences unavailable locally. But today’s market provides a far broader range of choices. Full-chain localization has emerged as one viable strategy for foreign companies adjusting to these changes.

Recent performance at Starbucks and Burger King illustrates the trend. Burger King’s store expansion has slowed sharply, dropping from 257 new outlets in 2023 to just 26 so far this year. Last year, Burger King China generated average annual sales of USD400,000 per store, compared with more than USD1 million across nine other international markets. Starbucks, meanwhile, faces intense pressure from fast-growing domestic coffee chains such as Luckin Coffee and Cotti Coffee.

Other brands rumored to be exploring a sale of their China operations -- including Häagen-Dazs and IKEA -- have also struggled. IKEA China’s revenue last year totaled CNY11.2 billion, nearly 30 percent below its 2019 peak of CNY15.8 billion.

Contrary to the “foreign retreat” narrative, an industry insider with a restaurant chain association told Yicai that China’s vast consumer market continues to attract capital. Many investors treat the food and beverage sector as a core asset class, the insider said. Foreign brands are particularly appealing because of their high degree of standardization and predictable growth, scale, and profitability. “The Starbucks project, for example, was highly sought after,” he added.

One party needs localized resources and operational capabilities; the other seeks strong assets and believes in the long-term growth of the Chinese dining market, analysts noted. When both sides share complementary needs and the valuation is right, deals come together naturally, they added.

Editor: Emmi Laine