Starbucks: Kraft Blocking Distribution Transition

SEATTLE ( TheStreet) -- Starbucks ( SBUX) and Kraft Foods' ( KFT) ongoing coffee distribution battle is heating up.

Starbucks told a federal judge on Thursday that Kraft is unfairly preventing it from ending their 12-year-old distribution agreement, where Kraft dispenses Starbucks' products to grocery stores and other retail outlets, hampering its attempt to move its distribution operation to a new partner, privately held Acosta.

The coffee shop giant said Kraft's court-issued injunction against Starbucks , filed in early December, will negatively affect its bottom line. Starbucks, which earlier this week unveiled a new logo , has accused Kraft on numerous occasions of mismanaging the distribution of its products, including store displays and marketing, and failed to take measures to "address the erosion of Starbucks market share."

Starbucks said its grocery sales fell to 26.7% in early 2010, from 32.7% in 2004. "It is Starbucks, rather than Kraft, that faces the threat of harm," Starbucks' filing noted. "Leaving Kraft in control of distribution of Starbucks' products pending a resolution of the parties' dispute -- allowing Kraft to do lasting damage to Starbucks' brand -- threatens harm to Starbucks that is both immediate and difficult to calculate."

Kraft's spokesman Mike Mitchell countered to Reuters that Starbucks' grocery sales declines in 2008 and 2009 coincided with the overall economic downturn and during a time when coffee competitor Dunkin' Donuts "aggressively" marketed its own coffee products.

In Thursday'sthat filing, Starbucks alleged that Kraft is blocking its attempt to shift its distribution business to Acosta, including sending a cease-and-desist letter that threatened Acosta with interference claims if it moved ahead and began marketing or distributing Starbucks products before or after March 1, according to a Reuters report.

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