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October 24, 2006

StarBucks Buys China A Cup of Coffee

posted by MR WAVETHEORY at 10/24/2006 01:08:00 PM
StarBucks at the Forbidden City, Beijing. Over 6 million people visit the Forbidden City every year.

Starbucks Corporation (Nasdaq SBUX) is buying its Chinese stores from its local joint venture operator. Back in the day when StarBucks entered China, there were rules against fully owned foreigned enterprises. That has since changed, so StarBucks will be buying out its Beijing and Tianjin partner bringing into the fold 60 stores. However, it hasn't bought its Shanghai business partners, but given the strategy of fully owned stores, I wouldn't be surprised if it happens soon.

BEIJING -- Starbucks Corp., in a bid to consolidate its Chinese business, said it acquired the Hong Kong-based company that operates more than 60 of its locations in Beijing and Tianjin.

The Seattle-based coffee company bought High Grown Investment Group Ltd. from its partner, private-equity firm H&Q Asia Pacific, for an undisclosed amount. The acquisition marks the second time that Starbucks has raised its ownership stake in its Chinese operations, which until now have consisted of joint ventures.

"It's bringing operations together in a way that allows us to maximize the development of our business in China...for the next 20 or 30 years," said Martin Coles, president of Starbucks Coffee International.

Starbucks' move comes as other global companies begin buying back ownership of their joint ventures in China, following the easing of regulations over foreign-owned retail operations in 2004. Before the change in regulations, restrictions on foreign investments prevented companies like Starbucks from owning and operating their stores in China, forcing those retailers to enter the country through joint ventures.

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