Starbucks acquires local coffee company

Starbucks, the world's biggest coffee chain operator, bought Beijing Mei Da Coffee Co yesterday, its authorized developer in North China, as it steps up its expansion in the country.

The Seattle-based coffee chain yesterday acquired High Grown Investment Group (Hong Kong), the majority shareholder of Beijing Mei Da, from H&Q Asia Pacific, a private equity firm.

Beijing Mei Da currently operates more than 60 Starbucks retail outlets in Beijing and the nearby port city of Tianjin.

Both sides declined to reveal the financial terms of the deal.

The latest acquisition, which gives Starbucks a 90 per cent controlling stake in Beijing Mei Da, will help the coffee company "achieve greater operational efficiencies and accelerate our expansion in China," said Wang Jinlong, president of Starbucks Greater China, yesterday.

"We are now poised to expand rapidly in this important region two years ahead of the upcoming 2008 Beijing Olympics," Wang said.

Beijing Sanyuan Company will continue to hold the remaining 10 per cent stake in Beijing Mei Da.

The deal comes at a time when the coffee chain giant is accelerating its expansion in China, which its chairman said, "would soon become the firm's largest market outside of North America."

China accounted for less than 10 per cent of Starbucks' US$6.4 billion global sales in 2005, its chairman Howard Schultz said in an interview with China Daily earlier this year.

"We believe China will eventually be the largest international market for Starbucks going forward," Martin Coles, president of Starbucks Coffee International, said at a press event yesterday in Beijing.

The US coffee chain operator is planning to open 20,000 stores around the world in the coming years, of which half are expected to be in the Asia-Pacific region, according to Coles.

"And in China, the number will be in the thousands," the president said yesterday, declining to give specific figures.

Starbucks had 190 stores in 19 cities throughout the Chinese mainland by October 1 this year. It opened its first store in Beijing in 1999,

This is the second time the US coffee shop giant has increased its equity stake in a local joint venture.

In 2003, Starbucks reportedly paid US$21.3 million to raise its 5 per cent stake to 50 per cent in Shanghai Uni-President Starbucks Coffee Ltd, a joint venture that was 95 per cent-owned by Taiwan-based Uni-President Group.

Shanghai Uni-President Starbucks Coffee Ltd is responsible for Starbucks' operations in Shanghai and neighbouring Jiangsu and Zhejiang provinces.

The possibility of Starbucks further raising its stake in the Shanghai venture remains, according to Coles, but he would not elaborate.

H&Q Asia Pacific, an Asia-focused private equity firm that has US$2.1 billion in assets under its management, bought a majority stake in Beijing Mei Da in 1998 for US$10 million, according to Bloomberg reports, citing Vincent Pun, senior research manager at Asian Venture Capital Journal in Hong Kong.

Source: China Daily