Starbucks Corp. said it would pay Mondelez International Inc., formerly known as Kraft, $2.79 billion to settle a dispute over distribution of packaged coffee.

The payment, ordered Tuesday by an arbitrator, consists of $2.23 billion in damages and $557 million in interest. The company said Wednesday it has adequate cash and borrowing capacity to fund the payment and will book it as a charge to its fiscal 2013 operating expenses.

Kraft was represented by Mike Ciresi, a well-known plaintiff's attorney for the Minneapolis law firm of Robins Miller Kaplan & Ciresi. "This is an enormous result for the client that completely validates their position," Ciresi said Wednesday.

Among other cases, Ciresi is known for having represented the state of Minnesota and Blue Cross and Blue Shield of Minnesota in a landmark settlement against the tobacco industry that totaled more than $6 billion.

The ruling settles a dispute that began in 2010, when Starbucks offered $750 million to end an agreement through which Mondelez, then known as Kraft Foods Inc., distributed its coffee to food retailers.

Kraft rejected the offer. Starbucks sought to wrest control of its packaged coffee business as revenue grew and surpassed gains in other segments.

Recent revenue growth at Starbucks is being driven by new products, such as K-Cups, "that would not have been possible without ending the Kraft arrangement," David Tarantino, an analyst at Robert W. Baird & Co. in Milwaukee, said in a research note Wednesday. The company can continue to grow its packaged-coffee business at an "above-average pace for an extended period," he said.

In Starbucks' fiscal 2012, revenue for packaged coffee and teas sold in grocery stores and other retailers jumped 50 percent, compared with a 14 percent sales increase for the entire company. That growth was largely driven by sales of Starbucks and Tazo brand single-serve K-Cup packs, the company said.

Starbucks said that it disagreed with the arbitrator's conclusion and said Kraft didn't deliver on its responsibility to the brand.

While Kraft Foods Group Inc. remained the named party in the dispute after it was spun off from Mondelez in October 2012, Kraft agreed to direct any recovery to Mondelez and said the arbitration's outcome won't have a material financial impact on it.

Mondelez said it would use the proceeds from the settlement to buy back stock.

In November 2010, Starbucks Chief Executive Howard Schultz said he planned to terminate the distribution pact with Kraft, which started with an agreement in 1998 that was superseded by a new deal in 2004. The world's largest coffee chain was seeking to generate more of its revenue from grocery stores with new offerings such as Via, its single-serve coffee product. It's also expanding its packaged coffee business in more overseas markets.

Starbucks is "building a multibillion-dollar global consumer packaged business," Schultz said in a webcast for investors Wednesday. "We now have the flexibility and the freedom to control our own destiny."

Starbucks shares rose 1 percent Wednesday to close at $81.46. Deerfield, Ill.,-based Mondelez rose 2.7 percent to $33.31.

Staff writer David Phelps contributed to this report.