http://www.iht.com/articles/2006/10/24/bloomberg/sxstarbucks.php

Beijing - Starbucks, the world's biggest coffee-shop chain, said Tuesday that it bought out a partner in more than 60 retail stores in China, gaining more control of its brand as the US company prepares to accelerate expansion in the nation.

Starbucks bought 90 percent of Beijing Mei Da Coffee, a licensee and owner of stores in Beijing and nearby Tianjin, from H&Q Asia Pacific and other owners, Starbucks said in a statement in Beijing. The purchase price was not disclosed.

Starbucks aims to more than triple its outlets around the world to 40,000 to challenge Yum! Brands and McDonald's as the world's biggest restaurant company. The acquisition will help the Seattle-based company improve efficiency and accelerate expansion in China, the country expected to become its biggest market abroad, Starbucks said.

Starbucks has 190 stores in 19 cities in Chinese mainland .

"It's a trend for foreign retailers to move from traditional joint-venture partnerships to wholly-owned enterprises," said Paul French, chief analyst of Access Asia Group, a Shanghai-based market research company. "The purchase will enable Starbucks to control supply chains and improve margins," French said in a phone interview.

"China will eventually be the largest international market," Martin Coles, president of Starbucks Coffee International, told a press briefing in Beijing. Starbucks has said it may ultimately have as many as 6,000 or 7,000 stores in the world's most populous nation.

Starbucks' global target, announced this month, supplanted the previous goal of 30,000 stores. The company had 12,440 stores as of Oct. 1, including 8,800 in the United States and 3,600 international locations.

Starbucks may exercise a right to increase its stake in a second venture, which includes Uni-President Enterprises of Taiwan and covers about 100 outlets in Shanghai and surrounding cities, Coles said Tuesday.

Starbucks agreed in July 2003 to pay $21 million to buy 45 percent of the Shanghai chain from President Chain Store and Uni-President, the Taiwanese partners said then.

"We are now poised to expand rapidly in this important region two years before the 2008 Beijing Olympics," Jin Long Wang, president of Starbucks Greater China, said Tuesday.

But French questioned the company's strength in China.

"Many Chinese have been to Starbucks, but they're not regular coffee drinkers," French said. "In the US, people buy takeout coffees, but most Chinese stay in the shop so the turnover is not good."

Starbucks first talked to H&Q Asia Pacific in 2004 about exercising an option to buy 45 percent of Mei Da Coffee, Hsu Ta-lin, chairman and founder of H&Q Asia Pacific, said in Beijing on Tuesday. The company later offered to buy 90 percent, Hsu said.

"We always have to look at an exit for investors, as we can't stay in forever like strategic investors," Hsu said. "This is pretty opportune time for us to exit," he said, adding that the fund involved was approaching the end of its life and the return was "quite satisfactory."

H&Q, an Asia-focused private equity firm with offices across the region and in Silicon Valley, started expanding the Starbucks business in 1999 from one store in Beijing, the statement said.

"The consumer product market looks robust, presenting a good opportunity to exit investments by private equity firms," Vincent Pun, senior research manager at Asian Venture Capital Journal in Hong Kong, said. "H&Q probably made a good profit out of this deal because valuations of the sector are increasing as the Olympic Games draw near."

Starbucks may get 18 percent of sales this year from overseas, up from 13 percent five years ago, Larry Miller, an analyst with RBC Capital Markets, wrote in a research note last month.