Ruling allows Starbucks to end Kraft partnership

By Caroline Scott-Thomas

- Last updated on GMT

Related tags Kraft Vice president Kraft foods

Ruling allows Starbucks to end Kraft partnership
A New York federal court has denied Kraft’s request for a preliminary injunction against Starbucks, paving the way for the coffee giant to end the companies’ packaged coffee distribution agreement on March 1.

Kraft Foods said it intends to appeal the decision.

Kraft said the distribution agreement, which has been in place since 1998, provides it with about $500m a year in revenues and asked a federal court in White Plains, New York to reject Starbucks’ request to end the deal on March 1, 2011. However, Starbucks claimed that Kraft had breached its contract, causing losses of about $100m in potential sales. The company said it told Kraft in October of its intention to end the distribution deal.

Meanwhile, Kraft has claimed that Starbucks tried to buy out of the agreement in August last year with an offer of $750m, but Kraft rejected the offer as inadequate.

On Friday, Judge Cathy Seibel ruled that Kraft had not proven that it had suffered ‘irreparable harm’, saying that either company was within its rights to end the agreement, as Starbucks had indicated it wished to do. It is still unclear whether the coffee firm will have to pay a fee to Kraft in order to terminate the deal – a matter that will be dealt with separately by an arbitration panel in Chicago.

Immediately following the ruling, executive vice president, corporate and legal affairs and general counsel for Kraft, Marc Firestone, said in a statement: “We're disappointed the judge decided not to grant a preliminary injunction. While we've always acknowledged that there are certain legal hurdles for obtaining a preliminary injunction, we avidly believe this case justifies an injunction and will argue that point vigorously on appeal.”

The two companies have been sparring publicly since November, when Starbucks announced that it wanted to end the deal.

Starbucks spokesman Alan Hilowitz said in response to the court’s decision: “We are hopeful this will bring an end to Kraft’s efforts to further confuse our mutual customers.”

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