Coffee with a shot of lawsuit

Coffee is a must on a college campus.

The fuel of late night study sessions, the only way to get out of bed in the morning — coffee is the life-sustaining force that runs the student body.

Getting that caffeine fix might have become just a little more costly due to another big company squabble between Starbucks Coffee and Kraft Foods.  

Kraft began its deal with Starbucks selling packaged coffee in stores in 1998, then later in 2012 through a spin-off of Kraft called Mondelez.

The spat between the two powerhouse companies started in March 2011, around the time individual serving size cups, called K cups, became popular.

Kraft decided to limit its K cup production of Starbucks Coffee to only those K cups that worked in Kraft machines.

In a statement released by Starbucks, the company declared that by doing so, 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.”

After getting into single servings, Starbucks’ market shares grew by more than 18 percent. Though Starbucks benefited by dropping Kraft, it breached the companies’ agreements.

Kraft sought legal action in 2011 that led to an arbitrator eventually ruling that through Starbucks Coffee’s early dissolution of its deal with Kraft, Starbucks will owe the Kraft spin off, Mondelez, $2.2 billion in damages and $527 million in judgment and attorney’s fees — a grand total of $2.75 billion.

This judgment could cause your $4 cup of Joe to be a bit pricier.

Due to the arbitrator’s rulings, Starbucks had to liquefy its borrowing capacity from its 2013 fiscal year, which just wrapped up at the end of September.

The costly $2.75 billion takes away from its $14.9 billion in revenues for the year.

With less revenue than anticipated, the cost to brew your brain juice could be shifted over to the consumer.

Though Starbucks has not officially released how much of an impact this will have on its customers, the loss of revenue is sure to leave a little grind in the coffee machines.   
Big company disputes like these are more damaging to the consumer than any other party involved.

While Kraft and Starbucks throw a tantrum about who does a better job selling packaged coffee, those of us who buy the coffee suffer from their legal fees and absorbent contracts.

Let’s hope other big name companies will learn to look out for the little guy and not breach binding agreements they have with each other.

But until then, I’m avoiding the scene of big company conglomerates, like Starbucks and Kraft, and finding a different source for my morning pick-me-up.

­— andlzimm@indiana.edu
Follow columnist Andrea Zimmerman on Twitter @AndreaLZimm.