Starbucks Corp has confirmed that it is not in a formal sale process for the UK business. This clarification was made a few days after a major media outlet reported that the coffee chain is exploring the option of selling the UK operations.
In a
statement, a company spokesperson said that Starbucks has not initiated a
"formal sales process" of its UK business and is continually evaluating
"strategic options" for international operations owned by the company.
Starbucks
is facing rising costs and extreme competition from rivals like Costa, Tim
Hortons, and Pret a Manager. The company also suspended its guidance for the
remainder of the fiscal year in May. At that time, it also reported quarterly
earnings. The step was taken as sales growth missed Wall Street targets due to
tough COVID-19 curbs in China.
The coffee
chain is also facing unionization efforts of its US workforce. The leadership
is also not too solid as the multinational company is looking for a permanent
CEO. Howard Schultz would be the interim CEO until the end of March.
The UK is
the largest market for Starbucks in Europe, Africa, and the Middle East. As of
2021, the company had 1,000 stores in Britain. Of those, 297 were owned by the
company directly, and licensees ran 703. This data was shared in a financial
report for the fiscal year ending in October 2021.
The total
revenue for the same fiscal year was about £328 million (or US$ 389 million).
It helped Starbucks UK Coffee to repay in full a £25 million loan from its
parent company that was taken to offset losses from reduced sales during the
first months of the coronavirus pandemic, said the company.
The chain
also stated that the footfall at travel, office, and inner-city sites had been
slower to recover as compared to suburban and retail park locations. A person
familiar with the matter said, "It's quite a capital-intensive estate. It's
pretty urban-focused. It got hammered quite hard in Covid [and] it hasn't come
back to the same level."
This isn't
the first time Starbucks has taken a huge step to deal with losses. In 2021,
the company chose to exit a joint venture worth US$ 2 billion in South Korea
which happens to be its fifth-largest market. At that time, it chose to sell
its stake to its local partner and the Singaporean sovereign wealth group GIC.
However, the company continues to receive royalties from the operation.
Starbucks
was performing well before the pandemic. The success increased with rising
retail sales under its brand after it closed a 2018 deal with Nestlé, the world's
largest food manufacturer.
Starbucks
isn't the only coffee chain impacted by the COVID-19 pandemic. Earlier this
year, market researcher Allegra Group stated that coffee chains in the UK would
need four years to recover completely from the slump caused by the deadly
pandemic. Read more about that forecast here.
Sources:
reuters.com/world/uk/starbucks-says-its-not-formal-sale-process-its-uk-business-2022-07-16/
https://www.business-standard.com/article/international/starbucks-mulls-selling-uk-business-after-coronavirus-pandemic-hit-122071700992_1.html
https://www.ft.com/content/bf998a33-d2cf-477b-abbb-bf4fc659cfc5