The legal fight between Starbucks (NASDAQ:SBUX) and Kraft (NASDAQ:KRFT), which is now awaiting a binding arbitration decision, will have to wait even longer. Both sides had said they expected the arbitration decision in the first half of the 2013 calendar year. In its newest quarterly filing, Starbucks has revised that to be expecting the decision in the second half of the year.
Fortunately, Starbucks clarified that it meant the second half of its fiscal year, which happens to end in September. But at least we know we'll have a decision before October, right? Not necessarily. "We are respecting the privacy of the proceedings, and there is no set deadline by which the arbitrators must provide a decision," said Starbucks spokesman Zack Hutson.
The ruling would put an end to a long-running legal battle over Starbucks's decision to reclaim the distribution of its bagged-coffee business from Kraft Foods Inc. in March 2011, said The Wall Street Journal. "Kraft unsuccessfully sued to block Starbucks from taking back the business that Kraft started from scratch and built up over 13 years under a licensing deal into a business with $500 million in annual sales," the story said.
The issue is now not whether Starbucks will pay Kraft an early termination fee, but how much it will be. The two sides are rather far apart, with Kraft calculating the debt at $2.9 billion, plus attorney fees. (Why do we think the attorney fees will trump that debt figure?) Starbucks said the amount is actually $62.9 million. (Let's split the difference!, suggest Kraft's lawyers, between our ludicrously embellished figures and your absurdly underestimated figures. This is sort of the Dilbert school of marketing math: "Let's assume that everyone on the planet has either heard of the word 'coffee' or has heard of someone who has consumed it. So just cough up one dollar for each of those people and we're good. You don't think one buck is reasonable?")
Analysts are actually guessing that the arbitration will force Starbucks to pay more than $1 billion.
Kraft Foods split up late last year, spinning off its North American grocery business into Kraft Foods Group while renaming itself Mondelez International, which focuses on snacks like Oreo cookies and Cadbury chocolates. Under the terms of that split-up, Mondelez would ultimately receive any money recovered from the ruling.
- See Wall Street Journal story
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