Tags: Starbucks | bagged | coffee | dispute

Starbucks to Pay $2.76 Billion to Settle Bagged-Coffee Dispute

Tuesday, 12 Nov 2013 05:56 PM

Starbucks Corp. said it would pay Mondelez International Inc. $2.76 billion to settle a dispute over the coffee-shop chain’s bagged coffee business.

The payment, ordered by an arbitrator, consists of $2.23 billion in damages and $527 million in interest and attorneys’ fees, Seattle-based Starbucks said Tuesday in a statement. The company said it has adequate cash and borrowing capacity to fund the payment and will book it as a charge to its fiscal 2013 operating expenses.

The arbitrator’s ruling may settle a dispute between the two companies that began in November 2010, when Starbucks said it would terminate an agreement through which Mondelez, then known as Kraft Foods Inc., distributed its coffee to food retailers. Starbucks said today that it disagreed with the arbitrator’s conclusion and said Kraft didn’t deliver on its responsibility to the brand, hurting the business’s performance.

Mondelez said Tuesday in a statement that it would use the proceeds from the award to buy back stock.

While Kraft Foods Group Inc., which was spun off from Mondelez in October 2012, remained the named party in the dispute, it agreed to direct any recovery to Mondelez and said the arbitration’s outcome won’t have a material financial impact on it.

Starbucks shares fell 1.5 percent to $79.40 at 5:15 p.m. in New York. Deerfield, Illinois-based Mondelez rose 3.3 percent to $33.51.

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