Starbucks to pay $3bn in row over packaged coffee

Kraft began selling Starbucks branded coffee in 1998

An independent US arbitrator has told Starbucks to pay $2.76bn (£1.74bn) in damages and other costs to Kraft Foods in a dispute over packaged coffee.

Kraft began selling bags of Starbucks branded coffee in 1998 under a deal that was due to run until March 2014.

But the US coffee chain ended the contract in 2010, accusing Kraft of breaking the terms of their deal.

Kraft challenged that move by starting arbitration proceedings saying it had built a business worth $500m a year.

On Tuesday the arbitrator ruled that Starbucks must pay $2.23bn in damages plus $527m in interest and legal costs.

'Proper compensation'

Kraft Foods was spun off by Mondelez International last year and under an agreement between those two firms the payments from the case will go to Mondelez.

"We're pleased that the arbitrator validated our position that Starbucks breached our successful and long-standing contractual relationship without proper compensation," said Mondelez.

In a statement Starbucks said it "strongly disagreed" with the conclusions of the arbitrator.

"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," it said.