Starbucks to pay Kraft $2.23 billion in damages over packaging dispute

Starbucks Coffee Company issued a statement on 12 November disagreeing with the decision that it must pay US$2.23 billion in damages plus $527 million in prejudgment interest and attorneys’ fees to Kraft. “We are pleased the arbitration has ended; however, we strongly disagree with the arbitrator’s conclusion,” said Troy Alstead, Chief Financial Officer and Group President, Global Business Services in a statment. “We believe Kraft did not deliver on its 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.”  Alstead added that Starbucks beleives taking its packaged coffee business back from Kraft was the right decision for the company, the brand and its shareholders. “The results over the past two and a half years clearly demonstrate that Starbucks at-home coffee portfolio is significantly healthier than it was before we assumed direct control from Kraft in 2011,'” he said in the statement. “We have the leading market share of premium packaged coffee, and our total at-home coffee portfolio has grown significantly under the direct model.” Alstead noted that packaged coffee and Starbucks premium single serve offerings cumulatively grew by US$3.2 billion in revenue since taking the business back from Kraft, and 47 per cent in profitability in the past two years.   

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