Starbucks stirs up trouble over Kraft deal

KRAFT Foods yesterday said it is seeking arbitration in its fight with Starbucks, which is trying to end a deal under which Kraft sells packaged Starbucks coffee to grocery stores.

Starbucks accused Kraft of failing to meet certain provisions of their arrangement, including keeping Starbucks involved in major marketing initiatives.

Kraft, which has overseen the growth of the packaged coffee business from $50m (£32m) to $500m in annual sales, in turn accused Starbucks of trying to walk away from their partnership without honoring its conditions.

Starbucks, which is also pushing for sales growth of its Via instant coffee, has made no secret of a desire to exert more control over its consumer packaged-goods business.

Yesteday, the company said it has exercised its right to end the relationship due to Kraft’s failure to fix the alleged breaches of their partnership. It expects to assume direct responsibility for the packaged-coffee business in March.

Kraft said it recognised Starbucks’ right to take over the business but said the deal calls for Kraft to get sufficient time to prepare for any transition.