Starbucks must pay billions for ending business deal

An arbitrator has concluded that Starbucks must pay $2.76 billion to settle a dispute with Kraft over coffee distribution.

The Seattle coffee icon has been in a legal battle with Kraft for three years. Despite the judgement, Starbucks CEO Howard Shultz told a conference call Wednesday that business has never been better.

“Starbucks today is firing on all cylinders with record operational and financial performance in both fiscal ’12 and the year that just ended in fiscal ’13.”

Starbucks dropped Kraft as its distributor of packaged coffee to grocery stores in 2010. Shultz said he “strongly disagrees” with the judgement.

“While we are all disappointed by the conclusions reached by the arbitrator, regaining full operating control of our packaged coffee business was without question the right strategic decision for Starbucks, our brand and our shareholders.”

He said grocery store sales are better than ever since separating from Kraft.

“We have also built a leading and growing position in premium single cup, an opportunity that was not available to us under the Kraft agreement, the fastest growing segment in at-home coffee,” said Shultz.

Schultz will write a check to Kraft, but not without a parting shot at Starbucks’ former distribution partner.

“Our plans, capabilities and aspirations are well beyond where Kraft could have possibly taken this business,” he said.

The Associated Press contributed to this report.