When Starbucks opened its first store in Beijing in 1999, it wasn’t just selling coffee; It was selling Western aspirations to China’s emerging middle class. The Seattle-based giant expanded rapidly to dominate China’s premium coffee landscape.
However, that early-mover advantage has come to an end. Due to aggressive pricing, mobile integration and a deep understanding of Chinese consumer habits, Chinese competitors such as Luckin Coffee and Manor have overtaken Starbucks in store numbers and captured market share. Luckin makes more than 90% of its sales through its app, while Starbucks still relies on in-store traffic.
financial Times Starbucks’ China revenue was recently reported to fall by nearly 19% to $3 billion (€2.58 billion) from 2021 to 2024. According to Euromonitor International, the coffee retailer’s market share has fallen from 34% to 14% (2024) over the past five years.
Amid such headwinds affecting its second-largest market, Starbucks this month announced it would sell a stake in its China operations to a Hong Kong-based private equity firm. The $4 billion deal with Boyu Capital creates a joint venture (JV) in which Starbucks retains 40%.
In a parallel move, Burger King this week announced a new joint venture with a Beijing-based private equity partner, selling a majority stake for a $350 million investment to expand from 1,250 to more than 4,000 stores by 2035.
It’s not just American multinationals. French sports retailer Decathlon plans to sell about 30% of its China business, worth between €1 billion ($1.16 billion) and €1.5 billion, as it faces pressure from local rivals.
Chinese brands are moving fast
For United States retailers, the problem is not only slowing demand but also the speed and sophistication of local rivals, who launch new products faster and price more aggressively. They also integrate seamlessly into China’s digital ecosystem through mobile platforms like WeChat and Alipay.
“Many of these global names have started to lose their brand power within China,” Chenyi Lin, an associate professor specializing in digital transformation at INSEAD Business School, told DW. “The new name of the game is agility and adaptability.”
Clues to the highly competitive nature of China’s consumer market include its 129 electric-vehicle brands, more than 50,000 coffee chains and more than 450,000 bubble tea outlets nationwide.
Local champions have not only saturated the mass market, but are now moving towards the upscale market, offering premium products at competitive prices. Even the extent of competition is fierce, with domestic players challenging foreign companies in food, fashion, electronics and mobility.
Jason Yu, managing director of CTR Market Research, says Chinese players used to copy big multinationals but are now sometimes overtaking them.
“For example, in the coffee market, local chains are launching new products very quickly, sometimes in just a few weeks, while Starbucks has to wait months for global approval,” Yu told DW.
Analysts like Yu and Lin expect the joint venture trend to accelerate, as Chinese brands expand globally while the dominance of Western names diminishes domestically.
American companies have reduced their dependence on China as the tariff crisis persists.
JV is merely a risk avoidance strategy. Many US manufacturers realigned their global supply chains following the COVID-19 pandemic to reduce reliance on China due to excessive reliance on a single source for manufacturing and parts. Apple moved some of its iPhone production to India, while Nike expanded manufacturing into lower-cost markets in Southeast Asia.
Amid uneven growth, US business confidence in China has also hit a historically low level, with only 41% of companies optimistic about the next five years, according to the industry lobby group. AmCham Shanghai’s September 2025 survey,
Yet rather than opting out, Starbucks and Burger King’s joint ventures with private-equity partners should enable them to gain momentum, capital and digital integration in a market where local brands now set the pace.
,[Chinese JV partners] “There is local knowledge, connections and resources to help multinational brands engage more with the local ecosystem rather than compete on their own,” Yu said.
Could this phase of joint ventures be different?
Historically, joint ventures were the standard way for foreign companies to enter China, mandated by law in the 1990s. However, these arrangements can be risky due to uneven regulatory enforcement, limited control over operations, and potential intellectual property risks.
Many American companies have had bitter experiences, facing weak controls, slow decision-making processes, and conflicts with local partners. By the 2000s, many foreign brands in China abandoned them, preferring wholly owned operations. Full foreign ownership in the retail sector is allowed only from 2022.
According to AmCham China, US corporations are skeptical about JVs. Trade tensions and geopolitics add another layer of uncertainty, the trade body said in a recent report. US-China tariffs on billions of dollars worth of goods are in effect, while growing differences over Taiwan and other regional issues have also raised concerns in the boardroom.
Can American brands maintain a competitive edge?
Yu told DW that joint ventures used to be seen as a necessary evil in China, but the latest deals are “very different” because they are less about legal necessity and more about strategic advantage.
“In a market where Chinese competitors launch new products in weeks and seamlessly integrate into digital platforms, agility is everything. Without these partnerships, many U.S. retailers will struggle to keep pace,” he said.
The biggest risk for American retailers is not competition but leaving China altogether. Moving away from the world’s largest consumer market would mean surrendering long-term growth. Coming out may seem like a risk to take, but it also risks becoming irrelevant.
“If you leave China, you not only lose sales today — you also lose the ability to shape the habits of tomorrow’s consumers,” Lin told DW. “Once those habits are set by local brands, it is almost impossible for foreign companies to win them back.”
Edited by: Uwe Hessler