Kraft to court: Loss of Starbucks ‘irreparable’

By Dow Jones Newswires
Posted Feb. 25 at 12:30 p.m.

Kraft Foods Inc. told a federal appeals court Friday that it will suffer “irreparable harm” if its distribution deal with Starbucks Corp. ends next week.

The two consumer products giants are in the midst of ending their 12-year partnership in which Kraft distributed Starbucks bagged coffee to supermarkets and other retailers. Starbucks plans to take on the business starting March 1.

Kraft is appealing a ruling from the U.S. District Court for the Southern District of New York, which denied its request to block Starbucks from taking over the distribution of Starbucks-branded packaged coffee March 1. U.S. Second Circuit Court of Appeals could rule on the case as early as Friday afternoon.

William Quinn, an attorney representing Kraft, argued the packaged-food company won’t be in a position to offer premium coffee for an undetermined period of time if Starbucks takes control of the business in March.

Kraft will lose the “advantageous relationships” it has cultivated with its customers, which is “harm that can’t be quantifiable,” Quinn said.

Though an appeal could delay the official transition, Kraft has notified retailers that coffee orders scheduled for delivery by Monday should have been placed and that future orders should go through Starbucks.

“It would be extremely disruptive at this late date” to change the transition date, said Aaron Panner, an attorney for Starbucks. He also noted Kraft still hasn’t publicized its plans were it to lose the distribution deal next month.

But Kraft countered that as long as its exclusive deal with Starbucks’ packaged coffee remains intact, it can’t commit itself to an arrangement with another supplier.

“How can we tell customers to not buy Starbucks and buy brand X?” when the deal is still in effect, Quinn asked.

Kraft has argued it needs months to formulate a strategy to find a new premium brand to sell. Starbucks, which publicly disclosed it wanted out of the deal in November, has said that Kraft violated several provisions of the pact, such as properly stocking shelves with its coffee, which allows it to end the deal.

Kraft, meanwhile, argues that none of the violations is a material breach that would allow Starbucks to end the agreement without paying a break-up fee some analysts estimate could top $1 billion. The question over whether Starbucks must pay a break-up fee will be heard in arbitration court, and is separate from the preliminary injunction.

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One comment:

  1. jack (me) Feb. 25 at 1:21 pm

    Again, Chicago Breaking News prints the legal nonsense spewed by Kraft lawyers. Lost business can be remedied by cash, which is the definition of an adequate legal remedy.

    Also, if things were so irremediable, why is Kraft saying that its customers should order from Starbucks directly?

    Maybe, some day, the media will recognize legal nonsense for what it is.