Starbucks defeats Kraft's bid to stop it from ending deal

Starbucks Corp can’t be stopped from ending a distribution agreement with Kraft Inc in favour of a plan by the world’s largest coffee-shop operator to buy companies to build up its grocery business, a judge ruled.

In December, Kraft sued to prevent Starbucks from terminating the deal before the companies resolved their dispute.

Seattle-based Starbucks planned to purchase businesses to expand its supermarket distribution, CEO Howard Schultz had said on December 1.

Kraft, which said it would appeal yesterday’s ruling, has denied Starbucks’ claim that it lost market share under the distribution deal, according to court filings. Kraft said it increased Starbucks’ share of total coffee sales by more than 10-fold from 0.9 per cent in 1998 to 10.6 per cent in 2010.

US District Judge Cathy Seibel disagreed with Kraft’s contention that it faced “irreparable harm” if Starbucks was allowed to terminate the agreement, which was required for a preliminary injunction.

Yesterday’s ruling at a hearing in federal court in White Plains, New York, was confirmed by Seibel’s chambers.

Seibel’s ruling doesn’t block Kraft from pursuing a claim for damages against Starbucks if the company goes ahead with its plan.

‘We are hopeful’ “Kraft failed to demonstrate the need for a preliminary injunction,” said Alan Hilowitz, a spokesman for Starbucks. “We are hopeful this will bring an end to Kraft’s efforts to further confuse our mutual customers.”

On December 23, Starbucks had said there would be no irreparable harm to Kraft “given this is fundamentally a commercial dispute that can be resolved through the arbitration procedures the parties agreed to in their contract.”

Starbucks claimed Kraft’s performance as a distributor of its coffee had been “unacceptably poor” and that it was legally justified in ending its participation in the agreement.

The “decision is not a ruling on the core question of whether Starbucks can terminate our contract without compensating us as the contract requires,” Kraft’s general counsel Marc Firestone said yesterday.