Starbucks Corp. informed Kraft Foods Inc. that it plans to end a more-than-a-decade-old deal under which Kraft distributes packaged Starbucks coffee to stores and other outlets.
Kraft, which also surprised Wall Street with its profit report, said it was too early to say what the impact of the lost agreement would be on its results. “We know this has been on their minds, but we haven’t entered into any specific conversations about the when or the why or the how,” said Kraft Chief Financial Officer Tim McLevish on a conference call with analysts.
But later Thurday, evening Kraft released a statement indicating it may not make it easy for Starbucks to leave.
“Kraft Foods’ agreement with Starbucks regarding the sale of packaged coffee in grocery stores and other channels is perpetual,” Kraft said in a statment. “Importantly, if Starbucks decides to exit its relationship with Kraft Foods, the agreement requires Starbucks to pay Kraft Foods the fair market value of the business plus, in certain instances, a premium.”
In a statement, Starbucks said Kraft’s has mischaracterized the nature of the agreement between the companies, including the term.
“Starbucks intends to work closely with Kraft to ensure an orderly transition,” the world’s biggest coffee company said in a statement on Thursday, after it reported higher-than-expected quarterly earnings.
Kraft — which itself makes coffee under the Maxwell House brand — has been distributing packaged coffee for Starbucks since 1998.
Starbucks released another statement Thursday evening
We consider it unfortunate that Kraft has chosen to make public statements that we believe mischaracterize the nature of the agreement between our companies, including the term of the agreement. It has been, and continues to be, our intention to keep these conversations private. There is a specific mechanism within the agreement for the resolution of disputes. As we said in our earnings call, we will ensure that our mutual customers remain well-served.
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