Starbucks and Kraft Near a Breakup

By Richard Gibson
Nov 6 2010

For the past 12 years, Kraft has been the single distributor for bagged coffee products through Starbucks according to a press release issue today by the company.

This has been a partnership that has served Starbucks well, allowing them to keep their brand alive in areas where they have no live store presence. 

However, Starbucks is looking to end the arrangement and Kraft is suggesting that the coffee company will have to pony up some big money if they want to end the partnership. With both sides firing lobs, it appears that litigation is the next logical step for the companies. 

Starbucks is currently under contract with Kraft to distribute their bagged coffee while also under contract with Pepsi to distribute their bottled products. Both partnerships have allowed them to maintain a large presence in the market but they have recently stepped up their own distribution system and they are looking to save money. 

Starbucks launched their new Via coffee systems without the need for Kraft or Pepsi, which means that they have built relationships with retail outlets around the country. With that knowledge under their belts, they feel that they are able to tackle the process of distributing their own products. 

The contract with Kraft is massive, spanning the entire US. As with most contracts in the business world there is a clause for early termination. 

According to some inside reports, there are many millions of dollars at stake and that could be money that will be paid to Kraft if Starbucks terminates the contract ahead of schedule.