Starbucks to work with Sequoia on China investments

The goal is to propel the US-based coffee shop chain's digital innovation in China, which is one of its two lead growth markets alongside the US. Starbucks opened its first store in Beijing in 1999 and now has 4,200 outlets in 177 cities nationwide. It initially operated in the country through joint ventures but bought out the last of its partners in 2017.

The company temporarily closed all its stores in China in response to the coronavirus outbreak, contributing to a 46% year-on-year decline in revenue to $384 million for the three months ended March. Global revenue fell 5% to $6 billion. However, the revival has been swift. CEO Kevin Johnson told analysts on an earnings call last month that almost all the China stores have reopened.

"Starbucks has an insatiable appetite for innovative ideas that augment the Starbucks experience and keep it at the forefront of China's retail landscape," said Belinda Wong, chairman and CEO of Starbucks China, in a statement about the Sequoia tie-up. "China's vibrant environment is a rich ground for entrepreneurship that has seen the emergence of many local innovators that we hugely admire."

The company launched its first store on Alibaba Group's Tmall platform in 2015. Last year, it rolled out Starbucks Now, a mobile ordering and payment app in China. Starbucks faced a challenge – albeit at a lower price point – from Luckin Coffee, which grew to 3,600 outlets by pursuing an asset-light, technology-heavy model based on take-out delivery and cashier-less outlets. However, Luckin's future is now uncertain after it emerged that a large portion of the company's 2019 sales were fabricated.

The collaboration with Sequoia is intended to give Starbucks early access to ideas in the retail marketplace. The VC firm is currently deploying its latest seed, venture and growth funds of $150 million, $550 million and $1.8 billion, respectively. The next iteration of China-focused vehicles is expected to close in June, according to a source familiar with the situation.

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• Topics
• Greater China
• Technology
• Consumer
• Early-stage
• China
• Sequoia Capital
• TMT
• starbucks