Starbucks Statement on Split with Kraft

November 30/Seattle; Glenview, Ill./Right Vision News -- Starbucks Coffee Company says it "strongly disagrees with Kraft's recent characterizations that have appeared in the media of the terms of the agreement between the two companies, including assertions that the agreement is perpetual in nature. Starbucks actions to terminate its distribution arrangement with Kraft are consistent with the terms of the agreement between the companies, the initial term of which was set to expire in 2014 unless sooner terminated per the agreement, as well as Starbucks' commitment to provide its grocery channel customers with the highest quality of service.

"The agreement included a number of provisions intended to ensure that Kraft would actively protect and promote the Starbucks Coffee and Seattle's Best Coffee brands, building on Starbucks position as the leading super-premium coffee brand. It also required Kraft to work closely with Starbucks, to maintain Starbucks involvement in significant marketing decisions and customer contacts. This was critical to the success of the relationship, given Starbucks market-leading position in the super-premium coffee business. Kraft did not meet its responsibilities under these aspects of the agreement. Starbucks raised these issues with Kraft, but there was never any improvement in Kraft's performance.

"Kraft's failure to meet its responsibilities resulted in the erosion of brand equity and experience at grocery that Starbucks customers have come to expect through their experience in Starbucks stores. In light of Kraft's failure to cure its breaches of the agreement, Starbucks has exercised its right to end the relationship. Starbucks notes that there are binding dispute resolution procedures under the agreement, and any action by either party to contest the dissolution of the agreement must be brought under those provisions. Starbucks expects to assume direct responsibility for its packaged coffee business beginning on March 1, 2011.

"In taking this action, Starbucks is mindful of its commitments to the grocery channel customers who carry its packaged coffee products. Starbucks is disappointed that Kraft is not living up to its obligation to ensure an orderly transition; however, Starbucks is committed to ensuring that its grocery customers experience a seamless transition and that this move benefits both their customers and Starbucks.

From the December 6, 2010, Prepared Foods E-dition