Associated Press

PORTLAND, Ore. (AP) -- Kraft Foods Inc. took a blow Friday in its fight to keep Starbucks Corp. from ending its distribution partnership with the food company.

A U.S. District Court judge denied Kraft's request for a preliminary injunction, which would have stopped Starbucks from unilaterally ending its distribution partnership with Kraft before the end of arbitration that is still under way and not affected by the court's decision Friday.

Kraft said it intends to appeal the court's decision.

Starbucks announced in November that it was ending the partnership with Kraft, which is more than a decade old. Starbuck said Kraft failed to effectively promote its products with grocers and other retailers.

Kraft denies that claim, saying it has helped expand the business from $50 million in revenue to $500 million. The company requested the injunction last month, saying that if Starbucks does end the agreement, it needed more transition time.

Kraft also argues Starbucks violated the terms of the contract and it should be compensated for the fair market value of the business, plus a premium of up to 35 percent.

While Kraft said it was disappointed in the court's decision, it is not a ruling on the core question of whether Starbucks can terminate the contract without compensating Kraft. That question, according to Kraft, will be decided in arbitration.

Starbucks said Friday it will continue with its plans to take over distribution March 1.

"We are hopeful this will bring an end to Kraft's efforts to further confuse our mutual customers," according to a statement from Starbucks.

Sales at grocery stores and other retailers are increasingly important to Starbucks as it tries to expand its business beyond just cafes and puts a heavier emphasis on selling a wider variety of products in stores.

Shares of Starbucks, based in Seattle, fell $1.28, roughly 4 percent, to $31.75 in afternoon trading. Shares of Kraft, which is based in Northfield, Ill., rose 10 cents to $30.64.

Copyright 2011 The Associated Press.

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