Starbucks Coffee Company (NASDAQ:SBUX) today issued the statement below
from Troy Alstead, chief financial officer and group president, Global
Business Services, regarding the conclusion of the company’s arbitration
with Kraft over its packaged coffee business. The company will host a
conference call to discuss the outcome of the arbitration at 6:00 am PT
tomorrow morning (Wednesday, November 13, 2013), which will be webcast
and can be accessed on the company’s website at http://investor.starbucks.com.
“We are pleased the arbitration has ended; however, we strongly disagree
with the arbitrator’s conclusion and that Kraft is entitled to $2.23
billion in damages plus $527 million in prejudgment interest and
attorneys’ fees. 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. While we disagree Kraft is
entitled to damages, the amount awarded reflects the value of our
at-home coffee business and the continued global growth opportunity that
lies ahead for Starbucks. We have adequate liquidity both in the form of
cash on hand and available borrowing capacity to fund the payment, which
will be booked as a charge to our fiscal 2013 operating expenses.
“I would add that taking our packaged coffee business back from Kraft
was the right decision for Starbucks, our brand and our shareholders.
The results over the past two and a half years clearly demonstrate that
Starbucks at-home coffee portfolio is significantly healthier than it
was before we assumed direct control from Kraft in 2011. We have the
leading market share of premium packaged coffee, and our total at-home
coffee portfolio has grown significantly under the direct model.
“Ending our agreement with Kraft also gave us the flexibility to
aggressively expand our growth in the premium single serve segment with
Starbucks® Coffee K-CUP® Packs and VerismoTM. With single
serve as the fastest growing category within at-home coffee, this
represents a strategic opportunity for Starbucks that will continue to
contribute meaningful growth for many years.
“Together, packaged coffee and Starbucks premium single serve offerings
are the cornerstone of the Channel Development segment of Starbucks
business, which cumulatively grew by $3.2 billion in revenue since
taking the business back from Kraft and 47 percent in profitability in
the past two years. Channel Development, which is still early in its
growth curve, is already the company’s second largest operating segment
with substantial potential for long-term global growth. With continued
focus, innovation and execution, we will build on Channel Development’s
strong momentum and expand our global footprint beyond our 29 current
markets and more than 100,000 points of distribution in the years to
come.”
Updated financial statements will be provided in upcoming filings with
the U.S. Securities and Exchange Commission. The details of the
arbitrator’s decision are confidential and Starbucks respects the
privacy of the arbitration process so the company will not be sharing
additional details from the ruling or the proceedings.
Forward-Looking Statements
This release contains forward-looking statements relating to certain
company initiatives, strategies and plans, including our packaged coffee
business and the performance our Channel Development segment, its
potential growth, size and footprint. These forward-looking statements
are based on currently available operating, financial and competitive
information and are subject to a number of significant risks and
uncertainties. Actual future results may differ materially depending on
a variety of factors including, but not limited to, coffee, dairy and
other raw material prices and availability, costs associated with, and
the successful execution of, the company's initiatives, strategies and
plans, the acceptance of the company's products by our customers,
fluctuations in U.S. and international economies and currencies, the
impact of competition, the effect of legal proceedings, and other risks
detailed in the company filings with the Securities and Exchange
Commission, including the “Risk Factors” section of Starbucks Annual
Report on Form 10-K for the fiscal year ended September 30, 2012. The
company assumes no obligation to update any of these forward-looking
statements.
About Starbucks Corporation
Since 1971, Starbucks Coffee Company has been committed to ethically
sourcing and roasting the highest-quality arabica coffee in the
world. Today, with stores around the globe, the company is the premier
roaster and retailer of specialty coffee in the world. Through our
unwavering commitment to excellence and our guiding principles, we bring
the unique Starbucks Experience to life for every customer
through every cup. To share in the experience, please visit us in our
stores or online at www.starbucks.com.
Copyright Business Wire 2013