When Starbucks opened its first Beijing store in 1999 it positioned itself as more than a coffee chain—it sold Western aspirations to China’s growing middle class and quickly dominated the premium coffee segment. That lead has pared back as nimble domestic rivals like Luckin Coffee and Manner surged ahead on price, product roll‑outs and mobile-first operations. Luckin now drives over 90% of sales through its app, while Starbucks still depends heavily on in‑store traffic.
Starbucks’ China revenues fell nearly 19% between 2021 and 2024 to about $3 billion, and its market share slid to 14% in 2024 from 34% five years earlier, Euromonitor International found. To respond, Starbucks agreed this month to sell a stake in its China business to Hong Kong private equity firm Boyu Capital in a roughly $4 billion deal that leaves Starbucks with 40% of a new joint venture.
Burger King made a similar strategic move, selling a majority stake to a Beijing private equity partner in a deal announced this week that brings in $350 million and aims to expand its China estate from about 1,250 stores to more than 4,000 by 2035. French retailer Decathlon is reportedly planning to sell about 30% of its China operations for €1–1.5 billion as it confronts stronger local competition.
Chinese brands are not just numerous but fast and digitally integrated. Retailers from the US face slowing demand at home and rivals that launch products much faster, price aggressively and plug seamlessly into China’s digital ecosystem via platforms like WeChat and Alipay. “A lot of these global names have started to lose their brand power within China,” says Chenyi Lin, an Insead affiliate professor specializing in digital transformation. “The new name of the game is agility and adaptability.”
The scale of competition is striking: China has around 129 electric‑vehicle brands, more than 50,000 coffee chains and over 450,000 bubble‑tea outlets. Local champions have saturated the mass market and are moving upmarket, offering premium products at competitive prices. Jason Yu, managing director of CTR Market Research, says domestic players once copied foreign firms but now can outpace them. In coffee, for example, local chains can roll out new items in weeks while Starbucks may wait months for global approvals.
Joint ventures (JVs) are one visible response. JVs were historically how many foreign firms first entered China—originally required by law—but they have also carried risks: diluted control, slower decisions, uneven enforcement and potential intellectual property exposure. Many foreign brands abandoned JVs in favour of wholly owned units in the 2000s; full foreign ownership in retail was only permitted from 2022. Still, analysts expect JV activity to grow now not from legal necessity but strategic choice, as Western firms seek local capital, speed and ecosystem access.
Beyond JVs, companies are reshaping supply chains as a form of derisking. The COVID‑19 pandemic exposed overreliance on single‑source manufacturing and parts. Apple moved some iPhone production to India and Nike expanded manufacturing in Southeast Asia. Trade tensions and geopolitics amplify caution: an AmCham Shanghai survey published in September 2025 found just 41% of US firms were optimistic about China over the next five years. US–China tariffs on billions of dollars of goods remain in place, and frictions over Taiwan and other issues add to boardroom uncertainty.
Even so, many Western firms are cautious about exiting China. Analysts warn that leaving the world’s largest consumer market risks surrendering long‑term growth and the chance to shape tomorrow’s consumer habits. “If you leave China, you don’t just lose sales today — you lose the ability to shape the habits of tomorrow’s consumers,” Lin says. Once domestic brands cement those habits, foreign companies find it hard to win them back.
Proponents argue the latest JVs are different: they are designed to give multinational brands local knowledge, connections and digital integration so they can operate more nimbly within China’s ecosystem rather than trying to compete on legacy global terms. As Yu puts it, in a market where rivals can launch products and integrate digitally in weeks, agility is everything. Without partnerships that speed decision‑making and deepen local ties, many US retailers risk falling further behind.
History shows JVs can be fraught; recent deals, however, reflect a recalibrated approach where multinational companies trade some control for capital, local expertise and faster execution. The balance companies strike between presence and control will shape whether they remain relevant to Chinese consumers or cede ground to local champions.
Edited by: Uwe Hessler
