Back in December, we wrote a blog post on Starbucks’ breach of contract lawsuit with Kraft Foods over the distribution of its bagged coffee. While the court ordered Starbucks to pay $2 billion, the company viewed the end of its contract as a win. As we mentioned in our post, Starbucks believed that despite the hefty payout, being able to control its own distribution would lead to much greater profit. With the growing popularity of K-cups, Starbucks’ bagged coffee sector has seen significant growth since its creation in 1998.
However, according to Starbucks shareholders, the company was not honest about the ramifications of the breach in its filings with the SEC. While the damages were awarded after Starbucks announced positive numbers, in actuality the lawsuit had a seriously detrimental effect on the company’s financials and significantly decreased the stock value.
The lead plaintiff in the lawsuit is seeking $2.8 billion in damages as well as more shareholder input.
While our last post depicted Starbucks as confident about its financial future, the tides seem to have changed. This lawsuit suggests some financial peril for the company. We will continue to follow this case as it unfolds. To learn more about our firm and the services we offer visit pattersonlawfirm.com or call (312) 223-1699.