Starbucks Considers Withdrawing from UK Amid 11% Inflation Outlook

[Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Major foreign media reported on the 17th (local time) that Starbucks is considering withdrawing its business from the United Kingdom. With forecasts suggesting that the UK's consumer price inflation rate will exceed 11%, the world's largest coffee chain is also grappling with profitability concerns.

According to insiders, Starbucks has hired Julian Roki, a U.S. investment bank, as an advisor to review its business direction in the UK. It is known that Starbucks is examining whether it can transfer shares to companies specializing in franchise businesses or private equity funds (PEFs) and secure certain profits. Foreign media mentioned that Starbucks transferred shares to Shinsegae and Singapore's sovereign wealth fund GIC in South Korea, its fifth-largest market last year, and currently only receives royalties.

Starbucks officially stated that it is not currently undergoing a formal process to sell its UK business but continues to consider strategic options.

Starbucks operates about 1,000 stores in the UK, employing approximately 4,000 people. Of these, 70% are franchises, and about 30% are company-operated stores. Like other coffee chains, Starbucks was severely impacted by the COVID-19 pandemic and has faced difficulties in business due to changes in consumer preferences following the expansion of remote work.

In its business report last October, Starbucks UK stated, "Operating costs are rising, and at the same time, takeout chains and others are offering coffee as a secondary discount item, intensifying competition."

Amid heightened competition, concerns over future cost increases are also growing. The UK's consumer price inflation rate entered the 9% range in April and is currently the highest among the Group of Seven (G7) countries. The Bank of England (BOE), the UK's central bank, expects consumer prices to continue rising for the time being, peaking above 11% in October.

Starbucks UK recorded sales of ?328 million and a pre-tax profit of ?13.3 million in the last fiscal year (November 2020 to October 2021), turning a profit. In the previous fiscal year, which was severely affected by COVID-19, it recorded a loss of ?40.9 million.

With the expansion of remote work and the slow recovery of travel demand after COVID-19, Starbucks' profits have not recovered as quickly as expected. An insider said about Starbucks stores, "They are quite capital-intensive real estate and concentrated in city centers," adding, "They were severely impacted by COVID-19 and have not yet recovered to pre-pandemic levels."

This content was produced with the assistance of AI translation services.