Starbucks to Pay Almost $3B for Terminating Grocery Deal

by Christopher Freeburn | November 13, 2013 10:11 am

Starbucks to Pay Almost $3B for Terminating Grocery Deal

Coffee Starbucks3 150x150 Starbucks to Pay Almost $3B for Terminating Grocery Deal[1]The decision to break an agreement with Kraft Foods (KRFT[2]) will cost Starbucks (SBUX[3]) a ton of money[4].

In 2011, the coffee shop chain walked away from a deal under which Kraft sold packages of Starbucks-branded coffee in supermarkets. Starbucks ended the agreement about three years before it was slated to expire. Now an arbitrator says Starbucks will have to pay $2.8 billion in damages, interest and legal fees to Kraft, Forbes notes.

In a statement, a Starbucks executive said that the coffee shop chain “had a right to terminate the agreement without payment to Kraft” because the food company wasn’t performing as required by the agreement.

The award will be paid to Mondelez International (MDLZ[5]), which split[6] from Kraft last year[7]. Mondelez retains Kraft’s supermarket distribution business.

Starbucks coffee is now sold in grocery stores though Acosta. It will take a charge to fiscal 2013 operating expenses to cover the award.

Shares of Starbucks slipped slightly in Wednesday morning trading.

More Starbucks Headlines:

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2011/05/Coffee-Starbucks3.jpg
  2. KRFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=KRFT
  3. SBUX: http://studio-5.financialcontent.com/investplace/quote?Symbol=SBUX
  4. a ton of money: http://www.forbes.com/sites/samanthasharf/2013/11/12/starbucks-ordered-to-pay-kraft-2-8-billion/
  5. MDLZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=MDLZ
  6. split: http://investorplace.com/2012/10/kraft-spin-off-mondelez-starts-trading-today/#.UoOWQ5G1Kf0
  7.  from Kraft last year: http://investorplace.com/2012/10/kraft-spin-off-mondelez-starts-trading-today/#.UoOWQ5G1Kf0
  8. Starbucks to Hire 10,000 Veterans, Military Spouses: http://investorplace.com/2013/11/starbucks-hire-10000-veterans-military-spouses/#.UoOUkJG1Kf0
  9. Tweet-a-Coffee: Starbucks Lets You Buy Coffee for Friend via Twitter: http://investorplace.com/2013/10/tweet-coffee-starbucks-lets-buy-coffee-friend-via-twitter/#.UoOUuZG1Kf0
  10. Starbucks to Open First ‘Tea Bar’ in NYC: http://investorplace.com/2013/10/starbucks-open-first-tea-bar-nyc/#.UoOU3pG1Kf0

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