Starbucks Fined US$2.76-billion in Kraft Dispute

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SEATTLE — Starbucks has been fined US$2.76-billion following a three-year dispute in which the chain terminated Kraft as a distributor of its packaged coffee to grocery chains.

Kraft began promoting Starbucks coffee in stores in 1998 with a contract renewal in 2004, which was to expire in 2014. In November 2010, Starbucks severed its agreement with Kraft, which led Kraft to file for arbitration.

Starbucks stands by its decision. “We are pleased the arbitration has ended; however, we strongly disagree with the arbitrator’s conclusion and that Kraft is entitled to $2.23 billion in damages plus $527 million in prejudgment interest and attorneys’ fees. We believe Kraft did not deliver on the responsibilities to our brand under the agreement, the performance of the business suffered as a result and that we had a right to terminate the agreement without payment to Kraft,” said Troy Alstead, CFO and group president, Global Business Services, in a statement released by the chain.

Starbucks will host a conference call Wednesday morning to restate its fourth-quarter results to reflect its recent operating loss.

 

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