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TEACHING MATERIALS & PUBLICATIONS FREE REPORTS EVENTS ABOUT
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Navigating Business Relationships Using
Negotiation
A negotiation case study involving two business giants can teach
negotiators about creating value at the bargaining table
BY PON STAFF — ON NOVEMBER 21ST, 2019 / BUSINESS NEGOTIATIONS

Back in 2013, a three-year negotiation and

dispute between Starbucks and Kraft Foods
over distribution of Starbucks packaged coffee
in grocery stores was nally resolved. On
November 12, 2013, an arbitrator determined
that Starbucks had breached its agreement
with Kraft and ordered the coffeemaker to pay
the food giant $2.75 billion.

After negotiating an agreement in 1998, Kraft began selling Starbucks packaged coffee
through grocery stores. In 2010, with sales of its packaged coffee reaching about $500
million annually, Starbucks offered to buy Kraft out of the contract for $750 million.
Starbucks wanted greater exibility to sell the single-serve coffee pods that were hot at
the time. The company’s agreement with Kraft limited Starbucks to selling pods that
worked only in Kraft’s Tassimo machines.

Kraft objected to the deal termination, but Starbucks broke off the business relationship
nonetheless. Since then, Starbucks’ share of the single-serving pod market and
grocery-store products has grown signi cantly. The parties’ dispute over Starbucks’
termination of their partnership moved to arbitration when the two sides were unable to
settle it on their own.

The business dispute illustrates how the uid nature of marketplace trends can cause
negotiated business agreements to become undesirable over time. In their original
agreement, Kraft and Starbucks would have been wise to agree upon set times for
renegotiation, during which they would have had leeway to revisit existing deal terms in
the face of changed economic and industry conditions. They could also have negotiated
conditions for ending the agreement early, such as cancellation penalties and other
forms of compensation.

Business Negotiation: Writing a Negotiated

Agreement
Some negotiations end with a negotiated agreement that is a plan of action rather than
a signed contract – for example, a plumber agrees to x the tile damage caused by his
work. Other negotiations wouldn’t be appropriate to commemorate in writing, such as
how you and your spouse decide to discipline your young child. But in virtually all
signi cant business negotiations, parties should put pen to paper after negotiating the
terms of their deal. In fact, contract law requires certain types of deals to be in writing
for them to be enforceable.

Sometimes you and your counterpart can draft the agreement on your own. In larger
deals and dispute settlement, however, lawyers or other third-party professionals draft
the terms for you. Unfortunately, the handoff from deal makers to deal drafters is error
prone – and these errors can have real business consequences.
We’d love to hear your stories! Share your business negotiation stories in the
comments.

Related Articles: Dealmaking: Three Deal-Drafting Pitfalls – Learn about three

dealmaking problems that business negotiators commonly encounter in the course of
their negotiations.

In Business Negotiations, Talks With Competitors Carry Risks – Know the risks inherent
in business negotiations with competitors and how to best deal with them in this
business negotiation skills tips article.

Status Anxiety in Business Negotiations – Concerns about status and reputation affect
many different types of negotiations. In this article, learn about how status anxiety can
impact business negotiations and learn valuable negotiation skills to grapple with the
issue.

How to Negotiate When You’re Literally Far Apart – Negotiations conducted at a

distance present unique challenges and opportunities for business negotiators. Find out
the business negotiation skills the skilled negotiator needs to employ when dealing with
a counterpart who is not physically at the bargaining table.

The Deal Is Done – Now What? – Even though the deal is completed, there are still some
areas that negotiators need to pay attention to in order to insure success at the
bargaining table. This article discusses the strategies business negotiators can employ
after the negotiation is over to guarantee their agreement’s success.

Negotiation Skills – Three Sources of Power at the Bargaining Table – What sources of
power does a negotiator have at her disposal while in negotiations at the bargaining
table? Read this negotiation skills tips article to learn more about the three sources of
power a negotiator has at her disposal during a negotiating session.

Dealmaking – The New Strategy of Negotiauctions – Bringing together auction theory

and negotiation theory in a practical and accessible way, Negotiauctions is an
authoritative guide to negotiating deals. Today’s increasingly competitive marketplace
is lled with business transactions that include elements of both negotiations and
auctions, yet the received wisdom on deal-making treats these two mechanisms
separately. Leading dealmaking scholar Guhan Subramanian explores the ubiquitous
situation in which negotiators are “ ghting on two fronts”—across the table, of course,
but also on the same side of the table with known, unknown, or possible competitors.

Originally published in 2013.

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Mutually Bene cial Agreements: Tips for Creating Deals that Last
How to Balance Your Own Values in Negotiation
Right of First Refusal: A Potentially Win-Win Negotiation Tool

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