Starbucks to pay $2.76B to settle Kraft dispute

Associated Press

NEW YORK

An arbitrator has concluded that Starbucks must pay $2.76 billion to settle a dispute with Kraft over coffee distribution.

The two consumer-products companies had been locked in a fight for three years after Starbucks Corp. fired Kraft as its distributor of packaged coffee to grocery chains.

The arbitrator determined that Starbucks must pay $2.23 billion in damages and $527 million in attorney fees, Starbucks and Mondelez said Tuesday.

Deerfield, Ill.-based Mondelez International Inc., which spun off Kraft Foods Group in October 2012, will get the award. Mondelez, whose brands include Cadbury, Oreo and Tang, said that it plans to use the money left after expenses and taxes to buy back stock.

Shares of Mondelez rose 97 cents, or 3 percent, to $33.40 in after-hours trading. Starbucks stock fell $1.20, or 1.5 percent, to $79.41.

Kraft began exclusively marketing Starbucks roasted and grounded coffee in stores in 1998 and renegotiated the contract in 2004. The contract was set to expire in 2014. But in November 2010, Starbucks told Kraft it was severing its agreement with Kraft. Kraft initiated arbitration proceedings to challenge the termination. The two officially separated in March 2011.