Following the news that Starbucks has partnered with Sequoia Capital to make strategic co-investments in next-generation food and retail technology across Mainland China;

Shagun Sachdeva, Consumer Insights Analyst at GlobalData, a leading data and analytics company, offers her view:

“The partnership between Starbucks and Sequoia Capital China comes at a time when the global economic slowdown due to the COVID-19 pandemic is forcing the companies to realign their business models and retool product portfolios as per the evolving consumer behavior.

“GlobalData’s COVID-19 Week 5 (25 March 2020 and 31 May 2020) consumer survey suggests that more than 40% Chinese are always/often influenced by how digitally advanced the service is. Against this backdrop, the strategic move by Starbucks seems to be an effort to move away from shop-centric model to the one that is consumer-centric and virtually borderless by adopting stronger virtual presence. This move will help Starbucks grow the coffee and retail industry in China.

“If we trace back, the ‘New Retail’ partnership between Starbucks and Alibaba Group in 2018, is again a testament of Starbucks’ vision to strengthen its market in China and expand its Southeast Asian footprint.

“The deal seems to be a win-win situation for both the companies as it offers an excellent opportunity to leverage on each other’s synergies. The deal will be instrumental in laying the digital roadmap for Starbucks and boosting sales through optimization of the existing retail touch points. Leveraging Sequoia’s hold across multiple markets in the region, Starbucks can enhance its presence in the Chinese market and tap into China’s most competitive tech space with integration of food and retail activities including supply chain efficacy and improved inventory control.

“Sequoia already has diverse and impressive portfolio comprising about 300 dynamic companies that brings in high returns on investment using differentiated technologies and innovative business models. The deal will complement its existing platform and allow Sequoia to gain competitive edge by harnessing Starbucks longstanding market presence, its deep-rooted innovation culture as well as insights on consumer landscape.”