In the ongoing legal spat between Kraft Foods Inc. and Starbucks Corp., Kraft said Starbucks plans to sever a 12-year coffee-distribution deal on Jan. 29, although Kraft is scrambling to block the plan.
“By the week of Feb. 13, Kraft would be out of stock of many products, thereby causing harm to its retail customers in the form of lost sales,” Kraft said in a court filing dated Dec. 17.
Kraft, which filed a Dec. 6 court injunction to prevent Starbucks from “unilaterally” breaking its supply contract, is asking the judge to hold a pre-motion court conference by Thursday.
The world’s No. 2 food company, Kraft has distributed Starbucks packaged coffee to U.S. food retailers since 1998, a business worth $500 million in annual sales, representing a fraction of Kraft’s total company revenue.
Starbucks publicly stated in November that it intends to sell its coffee directly to supermarkets, cutting Kraft out as the middleman.
The coffee chain plans to go it alone starting March 1 and is fighting Kraft’s request for a court-approved injunction. In a court filing Wednesday, Starbucks said it will “guarantee adequate supplies” of packaged coffee to Kraft “without disruption” until March 1.
“Starbucks has no interest in having empty shelves or unhappy customers,” the company said in the court filing.
Displeased with the direction of its packaged coffee sold at grocery stores, Starbucks has asserted that Kraft materially breached their contract.
In Wednesday’s court filing, Starbucks said its market share in the premium-coffee segment at food retailers has fallen every year since 2004. Kraft has countered that 2010 sales for the Starbucks business are up 8 percent over 2009.
Kraft has been pressuring Starbucks to pay up for ending their relationship. In August, Kraft rejected a $750 million offer from Starbucks as too low.
Under the current agreement, Starbucks sells its packaged coffee to Kraft and ships it to Kraft warehouses across the U.S. Kraft then supplies the coffee to supermarket chains and warehouse-club stores, handling all the sales and marketing strategies.
Starting March 1, Starbucks said Acosta, a Florida-based supermarket sales consultant, will develop merchandising strategies for its whole-bean and ground coffee sold at food retailers.
In the recent court filing, Kraft claims Starbucks is refusing to let it review marketing plans that go beyond Feb. 28 “for which Kraft has paid certain nonrefundable spending commitments.”
In afternoon trading Wednesday, Kraft shares were up 2 cents at $31.86, while Starbucks was up 3 cents at $32.89.
-By Matt Andrejczak
