Kraft, Starbucks put their dukes up on coffee deal
Starbucks announced Thursday that it has informed Kraft Foods Inc. that it is ending their decade-old agreement for distributing Starbucks' coffee to grocery stores.
Starbucks did not say what the deal was worth, or if it or another company would take over distribution.
Sales at grocery stores and other retailers are increasingly important to Starbucks, primarily because of its Via brand.
CEO Howard Schultz told investors the company plans to have more products available in stores in the future, after first introducing them in its cafes.
Speaking during a conference call Thursday to discuss Kraft's earnings, Kraft CFO Tim McLevish said Starbucks hadn't given formal notice of its decision, but he said Starbucks “has expressed their desire to control their strategic brands.”
McLevish said Kraft's distribution of Starbucks' Seattle's Best brand coffee has grown from $50 million in sales to $500 million, and he said the Northfield, Ill., company respects Starbucks' decision.
The companies issued brief dueling news releases on the matter late Thursday, each noting its intention to keep the talks private. Kraft said the companies' pact requires Starbucks to pay Kraft to exit the business. Starbucks said two hours later that it was “unfortunate” Kraft had chosen to “mischaracterize” the distribution agreement.