Kraft takes legal action over contract split with Starbucks

November 29, 2010

Emily Wilensky

(Getty/Tim Boyle)

Suburban Northfield-based Kraft foods has entered into arbitration with coffee giant Starbucks. The move comes after Starbucks announced it will end its distribution agreement with Kraft to supply packaged coffee to grocery stores.

Erin Swanson is a Kraft equity analyst at Morningstar. She said the disagreement shouldn't hurt Kraft's stocks.

“We haven’t made any changes to our investment opinion based on what’s going on. I think it’s going to take some time for these issues to be resolved, so I don’t think there’s going to be an impact on Kraft’s business over the near-term,” said Swanson. 

Swanson said Starbucks accounts for $500 million of Kraft's $40 billion in annual sales. Kraft is seeking up to 35 percent of Starbucks fair market value as compensation for revenue lost during the transition.
 
In a press release Starbucks said the agreement was set to end in 2014 but will instead end on March 1, 2011. The coffee company maintains the move to end the agreement was consistent with its terms. Starbucks said Kraft was not meeting its responsibilities to promote the brand.