Starbucks is considering a possible sale of its UK business as the world’s biggest coffee chain faces changing post-pandemic consumer habits and increased competition.
The group this year engaged advisers Houlihan Lokey to review potential options for the business, according to a person familiar with the matter, who said it could attract interest from a specialist franchise group or a capital investment.
The chain oversees around 1,000 stores in the UK, of which around 70% are franchises and the rest company owned. Along with other coffee and takeout chains, Starbucks has been hit hard by pandemic shutdowns and is struggling with how hybrid working has changed consumer habits.
Starbucks said it was ‘not in a formal sale process for the company’s UK operations’ but was continuing to ‘evaluate strategic options’ for those of its company-owned international operations. . Houlihan Lokey declined to comment.
News that Starbucks was considering options for its UK business was first reported by The Sunday Times.
In the UK, Starbucks “faces increases in operating costs as competition intensifies, with takeaway chains and restaurants focusing on coffee as a secondary, discounted offering “, according to the accounts of its UK branch for the year to October 2021.
Its UK arm, which employs around 4,000 people, returned to profit in the 12 months to October 2021, generating a pre-tax profit of £13.3m on sales of £328m, after posting a loss of £40.9million a year earlier.
The chain said footfall at office, travel and downtown sites had been slower to recover than suburban park and retail locations.
“It’s a capital-intensive area. It’s quite urban,” said a person familiar with the matter. “It was hammered pretty hard at Covid [and] he did not return to the same level.
In 2021, Starbucks exited a $2 billion joint venture in South Korea, its fifth-largest market, by selling its stake to its local partner and Singaporean sovereign group GIC, although it continues to collect royalties on the operation.
The US retailer, whose former chief executive Howard Schultz returned to lead the business in April, has seen growing success with retail sales under its brand after a 2018 deal with the biggest food maker in the world, Nestlé.