(Yicai) Nov. 6 -- Starbucks' prospects in China look promising following the recent acquisition of a majority stake in its China business by Boyu Capital Investment Management, a leading Chinese private equity firm, despite ongoing challenges, Yicai learned from interviews with industry insiders.

Starbucks has agreed to sell a 60 percent stake in a new joint venture that will manage the firm's retail operations in China to Boyu for about USD2.4 billion, the Seattle-based company said on Nov. 4. Starbucks will own the remaining 40 percent of the JV and will continue to own and license its brand and intellectual property to the new company.

The new JV will manage Starbucks’ roughly 8,000 stores in China and gradually expand to 20,000 locations, surpassing the total number of Starbucks outlets in North America.

Overall, the deal looks very promising, Zhu Danpeng, a food industry analyst, told Yicai. With Hong Kong-based Boyu’s involvement, Starbucks is expected to speed up the opening of new stores in the country and adopt more locally tailored operating strategies. Zhu also said he expects the company’s supply chain to improve.

Boyu will help Starbucks accelerate expansion in China's grassroots markets. Once the coffee chain reaches the milestone of 20,000 stores, Starbucks’ leadership in China's premium coffee market is likely to be further bolstered, Zhu said.

Boyu is also an investor in beverage chain Mixue Ice Cream & Tea and previously held shares in Ningxia Cezanne Dairy Industry, a supplier to local coffee chain Luckin Coffee, through one of its funds. Its portfolio also includes major internet platforms such as Alibaba Group Holding and Meituan, as well as a 45 percent stake in high-end luxury mall operator Beijing SKP.

Boyu’s extensive resources in China can help Starbucks shorten the store opening process in smaller cities, said Gao Chengyuan, chairman and chief executive officer of Guangzhou Tiaoyuan Marketing Consulting Management. Boyu could also offer insights from its experience of assisting Mixue to increase its store count, so as to support the next phase of Starbucks’ expansion.

Brian Niccol, chairman and CEO of Starbucks, has also said that Boyu's local expertise will help accelerate the brand’s growth in China, especially in small and medium-sized cities as well as emerging regions.

Boyu can help Starbucks reduce raw material costs by optimizing the supply chain and support digital upgrades by leveraging the resources of companies, such as Xiaohongshu and WeBank, in which it holds stakes, Gao said.

However, Gao believes that while Starbucks' long-standing commitment to a direct-operated model ensures consistent service quality, it hinders expansion. To grow faster, Starbucks may need to adjust its operating model and strike a balance between scaling up and maintaining the customer experience.

Editors: Tang Shihua, Kim Taylor