Starbucks' percentage of new stores growth in 2007 was only slightly lower than it was in 1999. But in 1999 it had 2,000 stores; in 2007 it was pushing a 10,000 company owned stores mark. Let’s put this in perspective: in 1999 Starbucks opened 447 stores - 1.8 stores per working day; in 2007 that number more than tripled to 1,403 stores a year - 5.5 stores per working day. At this level of growth physical limitations come in: there is only so much real estate that fits a company’s criteria at a certain point in time. Management started sacrificing on the quality of their decisions. Compromises were made that were unthinkable several years before. Stores were opened too close to each other or on the wrong side of the street, expensive leases were signed: They even hired baristas that would have fit in better at McDonald's – you get the idea.

Unfortunately, the present and the future will pay for the decisions of the past: Stores will need to be closed, long-term leases terminated, charges taken, corporate costs created in hopes of high growth eliminated and the corporate culture of partnership strained by barista layoffs.

Starbucks needs to go on a permanent growth diet (at least in the US), and realize that it has the metabolism of a 37-year-old and can digest fewer new stores. By tightening its standards for opening new stores, the company will be on the way to recovery, though at slower growth. Starbucks is blessed with financial strength, capable management and unbelievable brand. If management admits to themselves that the heydays of growth are behind, recovery should be fairly painless. Starbucks generates tremendous operating cash flows, which in the past were completely consumed by opening new stores. If the company were to go on the LSGO diet, its capital expenditures would decline and free cash flows balloon – the company's value unlocked.

But this discussion is not about Starbucks, it is about what is taking place in China.

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