South Korean retail giant Shinsegae Group and global coffee chain Starbucks are likely to extend their partnership for another 10 years, industry sources said Sept. 3.

Founded in 1999, Starbucks Korea is a 50-50 joint venture between Shinsegae affiliate E-Mart and Starbucks Corp. The Seattle, Washington-based company had reportedly received offers from Korean conglomerates and private equity funds to sell management rights in Starbucks Korea but eventually dropped the idea after negotiations with those who had made offers, the industry sources said. The current operations and product supply contract ends at the end of 2020. 

There were rumors that the Korean conglomerate and Starbucks intended to divorce upon reaching the 20th anniversary of their partnership.

The rumor sprang from the recent resignation of Lee Seok-koo, a former CEO appointed by Shinsegae who took the helm of Starbucks Korea in 2007. His resignation was accompanied by a 40-billion-won (US$330) dividend spree, the company’s first such payout in eight years. Starbucks’ moves in other countries also fueled the divorce speculation. In 2018, Starbucks acquired its East China joint venture while selling its operations in Brazil and converted its Singapore and Taiwan operations to licensed models.

“The dividend was offered because the company met two criteria for dividend distribution -- no debt and a certain ratio of EBITDA growth. Last year, both were fulfilled,” a Shinsegae official told The Investor. “We’ve never considered selling our stake,” he added.

Annually, Starbucks reportedly receives 5 percent of the total sales from its Korean unit. Starbucks Korea, which has more than 1,300 stores across the country, logged sales of 1.5 trillion won last year, with its EBITDA growing 10 percent a year on average.

By Park Ga-young (gypark@heraldcorp.com)