After a 12-year relationship, Starbucks wants to dump Kraft Foods as a distributor of its coffees in grocery stores. Preferring instead to distribute its own coffees. Starbucks has been developing relationships itself with retailers for a year with the launch of Via, its instant coffee. "A month ago, Starbucks informed Kraft of its intention to end that distribution arrangement," the food giant said in a statement. "The details and timing around any transition will be subject to further private dialogue. Starbucks intends to work closely with Kraft to ensure an orderly transition, putting an emphasis on ensuring their mutual customers are well served."
"Starbucks ... has expressed their desire to control their strategic brands, and we have had some discussions in recent weeks to that effect," Timothy R. McLevish, Kraft's chief financial officer, told analysts on the company's quarterly earnings call, reports AdAge. He said the two companies together grew the business at a rate of 20 percent per year. "Today it's around a $500 million business," he added. "We think both parties have been well served by our partnership." And Kraft Foods Inc. issued the following clarification regarding the agreement: Kraft Foods' agreement with Starbucks regarding the sale of packaged coffee in grocery stores and other channels is perpetual. Importantly, if Starbucks decides to exit its relationship with Kraft Foods, the agreement requires Starbucks to pay Kraft Foods the fair market value of the business plus, in certain instances, a premium. Kraft Foods intends to keep the discussions with Starbucks private and will not be providing further details or comments at this time.
Credit Suisse analyst Robert Moskow wrote after Kraft's third-quarter earnings report, that the likely end of the Starbucks relationship is a reason that 2011 is beginning to lose its luster for the food giant, reports the Chicago Tribune.