Is Starbucks Preparing To Sell Its UK Locations?
Even the big dogs of business, like Starbucks, were hit hard by the initial coronavirus lockdown of 2020, and are still recovering from it. In Q4 of 2020, the store experienced a 9% drop in global sales because overall transactions were down nearly 25% (via Starbucks Investor Relations). Although the Seattle-based company saw an overall decline in fiscal performance, some locations were affected by the pandemic more than others. Sales in the U.S. dropped by 9% and China seemed to be the least affected, with sales only dropping 3%.
Locations in Europe, the Middle East, and Africa, however, saw a whopping 32% drop in revenue in 2020 (via Starbucks Stories). Fast forward to the end of 2021, and Starbucks reported that stores in the U.K., the chain's largest market in the EMEA sector, had yet to reach pre-pandemic sales numbers (via Starbucks Stories). According to Bloomberg, the Allegra Group predicts that this pattern will continue for U.K. coffee shops well into 2026. Since the future of U.K. Starbucks seems pretty bleak, the chain may be weighing its options.
Starbucks' advisor was told to search for potential buyers in the UK
Not only have Starbucks locations in the U.K. not completely bounced back from the effects of the pandemic, but the brand is experiencing more intense competition. Judging from data published by Statista, in 2019, Costa Coffee crushed other coffee shops in terms of revenue, and as of January 2022, the chain has more locations in the U.K. than any other brand. When we say "crushed," we mean that in 2019, Starbucks and Caffé Nero both made less than half the revenue of Costa. Pret A Manger and Tim Hortons were also name-dropped by The Sunday Times (via Reuters) as threats to the Starbucks coffee empire.
Like many other businesses, the chain is also experiencing rising costs. With all these elements against them, it makes sense that the company told its advisor Houlihan Lokey to poke around and see if anyone would be interested in acquiring the brand's 1,000+ locations in the U.K. (via The Sunday Times). Although this might make it seem like a done deal, the company has not started a "formal sales process," according to The Sunday Times. A company spokesperson also said as much to Bloomberg. The fate of Starbucks' U.K. stores remains uncertain, with the company using the vague language that it is "evaluating strategic options" at this time.