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Starbucks Coffee receives rude awakening re contract fight with Kraft

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In 2004 a ten-year contract was signed to give Kraft (owned by Mondelez International) the exclusive right to market, sell, and distribute packaged Starbucks coffee to retailers.

In 2010 Starbucks backed out of the deal citing breach of contract, accusing Kraft of breaking the terms of their deal.

Kraft initiated an arbitration proceeding.

The three-year dispute ended last month when an arbitrator ruled that Starbucks was in the wrong and shall pay $2.23 billion in damages and $527 million in additional fees to Mondelez plus attorney's fees to be determined later.

Michael V. Ciresi, lead trial counsel for Kraft, commented,

“This three-year arbitration allowed for a thorough and complete review of the contract and full determination of fair market value of that agreement. We are very pleased at this enormous outcome, validating Kraft’s challenge to Starbucks’ improper termination of their contract."

Gerd Pleuhs, Executive Vice President Legal Affairs & General Counsel of Mondelez International, also commented,

"We're pleased that the arbitrator validated our position that Starbucks breached our successful and long-standing contractual relationship without proper compensation. We're glad to put this issue behind us. We can now fully focus on growing our global snacks business."

Troy Alstead, chief financial officer and group president for Starbucks had his own response. He stated in part,

"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....

"I would add that taking our packaged coffee business back from Kraft was the right decision for Starbucks, our brand and our 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 also stated that he's glad it's over and they're done doing coffee business with Kraft/Mondelez.

Statement: Response to Kraft’s Statement Regarding Starbucks Consumer Packaged Goods Business

Arbitration Ends Coffee Contract Dispute

Starbucks wakes up, smells coffee, pays Mondelez megabucks

Starbucks Must Pay Mondelez $2.7B In Bagged Coffee Row

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