Coffee giant Starbucks lost large investor PAX World Funds due to the launch of their new java liquour, an alcoholic coffee product made in conjunction with Jim Beam.

An American mutual fund company that invests only in businesses it deems socially responsible has dropped Starbucks Corp., citing the coffee giant's decision to enter into a development and distribution deal with whiskey maker Jim Beam to create a new java liqueur

In a statement yesterday Pax World Funds said that they had no choice but to divest itself of 375,000 of Starbucks shares, worth $23.4 million. The Starbucks shares make up about 1.6 per cent of its Pax World Balanced Fund portfolio.

Pax, a New Hampshire-based fund family, describes itself as “the United States first socially and environmentally responsible mutual fund.” The company steers clear of companies involved in defense or weapons, tobacco, liquor or gambling.

Pax World Funds Vice President of Social Research Anita Green said: "While we continue to admire and respect many aspects of Starbucks' business and corporate citizenship activities, the company essentially forced our hand in this matter.”

Pax World Funds said it sent Starbucks CEO Orin Smith a letter in mid-February urging the company to end its deal with Jim Beam, which was announced last year.

“We have divested ourselves of these shares reluctantly and only after trying to get the company to reconsider its course of action. In the absence of a reversal by Starbucks, our course of action was clear: Investors in Pax World Funds expect us to do what we say we will do about avoiding companies that produce liquor," Ms Green added.

In a written response to the fund's announcement, Starbucks said it was disappointed but understood Pax World Fund's strict policy on not investing in companies that make money from the manufacture of liquor.

"Starbucks is committed to responsible marketing, and proud of our history of corporate responsibility," the statement said. "Prior to the introduction of this product, Starbucks worked diligently to research and understand its potential impact."

Starbucks Coffee Liqueur which was launced on February 17, is sold in restaurants, bars and stores licensed to sell liquor. It is not sold in any of the coffee chain's stores.

In the statement, Starbucks noted it is sponsoring a national program aimed at educating parents and children about the dangers of underage drinking.

Shares of Starbucks fell 22 cents, or 0.4 per cent, Wednesday, to close at $51.44 on the Nasdaq Stock Market.