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Starbucks-Kraft Dispute Percolates on Market Share

SEATTLE ( TheStreet) -- Starbucks (SBUX - Get Report) and Kraft Foods' (KFT) ongoing coffee distribution battle continued to heat up ahead of a Jan. 27 hearing.

Kraft Foods alleged in a court filing Friday that market share performance did not factor into its contract with Starbucks, a partnership whereby Kraft dispenses Starbucks' products to grocery stores and other retail outlets in the United States, Canada, Britain and other countries.

Starbucks has repeatedly claimed that Kraft neglected and mismanaged the partnership, including store displays and marketing, and failed to take measures to "address the erosion of Starbucks market share," all of which supposedly cost Starbucks millions in lost sales and a smaller market share in its grocery-based coffee sales business. Starbucks said its grocery sales fell to 26.7% in early 2010, from 32.7% in 2004.

The coffee shop chain hopes to end the 12-year arrangement by March 1 and move its distribution operation to a new partner, privately held Acosta.

In Kraft's latest court filing, the processed food maker claimed that market share performance was not a factor in its distribution agreement with Starbucks.

"We dispute its relevance. It's hypothetical. That has no bearing on the question of whether they have the right to terminate and walk away for nothing on their own time table," Marc Firestone, Kraft's general counsel, told Reuters.

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