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Wahaha vs Danone
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The rancor between Wahaha, China's leading beverage company, and its multinational partner Danone has been grabbing headlines since early this month.


It is unfortunate that an international business marriage that was hailed as one of the great success stories of joint ventures in China has turned sour.


Given the sea change that has taken place in China's business climate in recent years, it is not all that surprising that a once perfect couple may think different now.


Danone's joint venture with Wahaha was first signed in 1996 to sell water, yogurt and tea drinks. Both sides profited richly as Wahaha water became the leading brand in the China market.


Zong Qinghou, founder and chairman of Wahaha, now ranks among China's richest. For Danone, the joint venture accounted for more than 5 percent of operating profits last year.


Although there have long been disagreements between the two sides, the tensions threatening to tear apart the 10-year joint venture only burst into the open recently.


Zong accused Danone of trying to take control of certain Wahaha subsidiaries that are not part of the joint venture.


Danone hit back by accusing Wahaha of setting up a parallel operation that bottled and sold the same drinks as the joint venture. It also began legal proceedings against the Chinese group.


With a 51-percent stake, Danone technically has a decisive say in the joint venture. But as the influential chairman and general manager of the joint venture, Zong appears an inseparable driving force behind the entire Wahaha business.


Unfortunately, Zong's playing the card of "the country's economic security" sounds not only irrelevant but foolish. His emphasis on Wahaha as a Chinese brand is not as convincing as he might have expected.


The case should be addressed in a manner that puts business interests first as long as they are legal. Such a solution will not only be fair to both sides but also set an example for other joint ventures in the country.


(China Daily April 19, 2007)


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