STARBUCKS, KRAFT TEAM FOR SUPERMARKET RUSH

MARYELLEN LO BOSCO

SEATTLE -- Starbucks Coffee Co. here and Kraft Foods, Tarrytown, N.Y., announced that they are partnering to make Starbucks a national coffee brand in supermarket chains across the United States.

Starbucks has entered into a long-term licensing agreement with Kraft, which is intended to be the first phase of a domestic and global partnership. Starbucks is combining its expertise in sourcing, roasting and packaging specialty coffee with Kraft's knowledge of marketing, selling and distributing packaged foods.

"We are in a 60-day transition period," explained Alan Gulick, spokesman for Starbucks, "but there's no definite time line, as far as when this will be completed. We are focusing on managing an effective transition. Certainly, there is the expectation of expanding into national distribution." But Gulick couldn't say when national distribution is expected to be accomplished.

Pat Riso, spokeswoman for Kraft, said that the company will be "tapping its sales and marketing expertise to expand the coffee line nationwide."

Starbucks initially tested its coffee in supermarkets in Chicago, and then, this spring, in 10 West Coast markets, for a total of 3,500 stores. According to Gulick, the results were good, and there was minimal cannibalization of whole bean sales in Starbucks retail stores.

Prices in supermarkets are consistent with prices in retail stores, although the coffee is sold by the pound at Starbucks and in 12-ounce bags at the supermarket, with a suggested retail of $7.45.

Gulick reiterated that Starbucks is not worried about cutting into its own business through supermarket distribution. "Seventy-five percent of coffee purchases are made at the grocery store," he said. "That's a whole new customer we haven't reached out to and that's a great opportunity."

"They [Starbucks] are not competitors [to us]," noted Riso. "Maxwell House has its own following, as does Starbucks. This gives Kraft the ability to expand its coffee portfolio to include a superpremium coffee," she said. Currently, Yuban, General Foods International Coffees and Sanka are in Kraft's portfolio as well.

Currently, Starbucks House Blend, Decaf House Blend, Espresso Roast, French Roast, Colombian and LightNote coffees are available in supermarkets, and Gulick expected that assortment to continue.

Starbucks recently introduced four stockkeeping units of its Milder Dimensions coffee to its retail stores: Breakfast Blend, Serenade Blend, LightNote Blend and DeCaf LightNote Blend. According to Gulick, this move is not at all connected with the recent agreement with Kraft.

The new milder coffee is a good introduction to Starbucks and provides more coffee options to people without compromising quality, he said.