Starbucks Has To Shell Out $2.7 Billion In Dispute Over Packaged Coffee

When you don’t want to play anymore, it’s time to pay. At least in the world of business, where deals can’t just be dropped whenever it’s convenient. Starbucks is on the line for $2.7 billion it must pay to settle a dispute between it and Kraft Foods after the coffee giant ended a distribution deal for its bagged coffee.

The two were duking it out under an arbitrator, who decided yesterday that Starbucks will fork over $2.23 billion in damages plus another $527 million in prejudgment interest and attorneys fees after Starbucks slunk out of a deal early. Mondelez International will get the money as it spun off from Kraft in 2012, reports USA Today.

Things went sour in March 2011 when Starbucks skipped out on a contract it had with Kraft since 1998 that allowed the food company to sell its bagged beans in grocery stores.

Both sides blamed each other, of course: Starbucks said Kraft mismanaged the brand, causing breach of contract. But Kraft said that wasn’t so and told Starbucks it had to pay up as it was going to lose $500 million per year without that deal.

“We strongly disagree with the arbitrator’s conclusion,” said Troy Alstead, Starbucks chief financial officer, in a statement. “We believe Kraft did not deliver on its responsibilities to our brand under the agreement.”

Dispute with Kraft costs Starbucks $2.7 billion [USA Today]