Kraft and Starbucks in billion-dollar legal fight

Starbucks: faces legal action from Kraft over ending of distribution deal
Starbucks: faces legal action from Kraft over ending of distribution deal

Kraft Foods has begun legal proceedings against Starbucks, after the Seattle-based coffee maker decided to end a 12-year deal that allowed Kraft to sell the chain's packaged coffee.

Kraft’s legal bid for compensation escalates a simmering row between the two parties that began when Starbucks said it intended to terminate the commercial relationship, which involves Kraft distributing bags of Starbuck’s whole bean and ground coffee to supermarkets, in March.

The tie-up between the two companies covered the US, UK and Canadian markets.

Marc Firestone, executive vice-president, corporate legal affairs, at Kraft, said: "In effect, Starbucks is trying to walk away from a 12-year strategic partnership, from which it has greatly benefited, without abiding by contractual conditions.

"Kraft reasonably expected Starbucks to honour the contract. We are confident in our position and look forward to presenting the facts before the arbitrator."

According to Kraft, under the terms of the commercial agreement, Starbucks must pay out a compensation fee that amounts to a "fair market value" of the joint venture, plus 35% of that value.

It is thought that should Kraft win the case, the payout could be as much as $1.5bn (£965m).

While Kraft is not disputing Starbucks' right to terminate the agreement, it claims that the business has grown from generating annual revenues of less than  $50m in 1998, to $500m in 2010.

In response, Starbucks has said that Kraft failed to work closely on marketing issues and that Kraft’s failure to meet its responsibilities had resulted in "the erosion of brand equity".

The two sides also have different interpretations of the duration of the original agreement. Kraft claimed it was an indefinite partnership, but Starbucks said it was only due to last until 2014.


Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now


Oasis #springasmile digital campaign gets people doing good deeds
Coca-Cola: 'Don't approach bloggers with a fait accompli'
Tesco CMO Matt Atkinson: 'It is so important not to stereotype mothers'
McDonald's gives Ronald a new look ahead of global 'Fun times' social media push
In pictures: BrewDog opens first craft beer shop BottleDog for 'beer aficionados'
Facebook ad revenue leaps $1bn as it invests in targeting
Malteser or Maltesers? Mars takes Hershey trademark dispute to court
Apple Q2 profits top $10bn as iPhone sales soar
Lynx tells men not to leave love to fate
HBO captures awkwardness of watching sex scenes with parents
Primark to open first US stores with Boston chosen as flagship location
Marketing spend on the up but a reality check is needed before celebrating
Top 10 ads of the week: Jackpotjoy and BT Broadband fend off Kevin Bacon
Lidl beats Tesco to 10m Facebook fans
Center Parcs ad banned for encouraging parents to take kids out of school
Coca-Cola, Cadbury and Amazon named top brands for targeting youth market
Leaked document shows Nokia to be rebranded as Microsoft Mobile
Nike lays-off hardware staff in move that casts doubt on future of FuelBand
Greenpeace says save the bees or humans will die
What brands need to know about changes to VAT and online downloads in 2015
Jimmy Savile victims urged to claim compensation in new ad campaign
UKIP launches biggest  ad campaign and stirs up 'racist' accusations
Apple boss Tim Cook provides voiceover on ad touting firm's renewed green commitments
John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Tom of Finland's 'homoerotic' drawings made into stamps
Toyota achieves the impossible by calming angry Roman drivers
YouTube reveals user habits to appeal to 'older' marketers