Starbucks must pay Kraft Foods US $2.76 billion

What? Starbucks must pay Kraft Foods US $2.76 billion for breaking the Companies grocery deal three years early.
Why it matters? The deal was set to expire in March 2014, and automatically renew for successive 10-year terms,  but it was finished sonner than the agreement.

starbucksThe companies grocery deal was ended three years early by Starbucks.  Kraft was selling bags of Starbucks coffee in grocery stores, but Starbucks prematurely ended the contract in March 2011 and gave the business to privately held Acosta Inc., accusing Kraft of multiple material breaches of contract, including mismanaging the brand.

Now, the company must pay Kraft Foods US $2.76 billion. Mondelez International Inc , which derived from Kraft Foods as an independent company, will receive all profits from the dispute under an agreement between the two companies.

According to rules of the arbitration, Starbucks must pay US $2.23 billion in damages plus US $527 million for interest and legal fees. Whatsmore, the company cannot appeal. The payment assimilates what Kraft had first required.

As a consequence, Shares in Starbucks dropped 1.2 percent at US $79.41 in extended trading.

Starbucks does not agree with the arbitror’s conclusion but will adequate to the payment in the form of cash and with its available borrowing capacity.

The contract was prematurely concluded in March 2011 and the business given later to privately held Acosta Inc.

Starbucks blamed Kraft for multiple material breaches of contract and mishandling the brand. Kraft denied that and alleged that Starbucks must pay a reasonable value for the business if it wanted Kraft out.

The deal was set to expire in March 2014, and automatically renew for successive 10-year terms except it is finished sooner per the agreement.

Source: reuters

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