Starbucks should spin off its China business, Bank of America says

) should consider spinning off its China business due to its volatility, lower profitability, and slower growth compared to other markets.

The analysts note that Starbucks remains well-positioned in China, but the overall market growth has slowed.China’s GDP growth, which is closely correlated with Starbucks’ performance, has been sluggish, and deflationary pressures have resulted in negative ticket growth. In addition, BofA says while coffee consumption is on the rise, it remains low compared to other Asian markets like Japan.

Moreover, they explain that this strategy would allow Starbucks management, particularly new CEO Brian Niccol, to concentrate on the U.S. market, which accounts for 73% of its 2023 EBITDA before corporate expenses.

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