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Danone Strikes back at Wahaha
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French food giant Groupe Danone SA took legal action against Wahaha yesterday, accusing its Chinese partner of violating a joint venture contract by illegally using the Wahaha brand name.

In a statement, Danone said management of the Hangzhou Wahaha Group took no action against "illegal" businesses started by Zong Qinghou, Wahaha's founder.

"Under such circumstances, Groupe Danone SA formally launched the related procedure," Danone, which has a 51 percent stake in Wahaha, said in the statement.

Danone did not say what type of action it would take and indicated that it is still in talks with its Chinese partner.

Last month, the French yoghurt maker sent a notification letter to Zong, threatening litigation procedures within 30 days.

"We mean to end this soon because the public disclosure and rumors bring no good to anyone involved in this, including Zong Qinghou," Emmanuel Faber, chairman of Hangzhou Wahaha Group and Danone's Asia-Pacific president, said at the time.

Subsequent negotiations produced no resolution and both sides kept mum about the joint venture's board meeting on Tuesday.

Danone has said it hoped the dispute could be resolved peacefully, adding that it was "creating a time frame" to address the issue by legal action.

Wahaha was unavailable for comment yesterday.

Zong recently accused Danone of attempting a hostile takeover.

Danone and Wahaha set up five joint ventures in 1996 under an agreement that bars Wahaha from making products that compete with those produced by the ventures. The company cannot use the Wahaha brand without Danone's consent.

"We consider such provisions unfair, prohibiting us from making goods that are produced by the joint ventures while imposing no restrictions on Danone itself," Zong said.

Danone disagreed, calling the agreement "just and fair".

"Zong is using public opinion to serve his personal interests," Faber said.

In the first quarter of 2007, Danone reported consolidated sales of 3.67 billion euros, a year-on-year increase of 3.9 percent.

European sales in the first quarter grew 7.8 percent to 2.24 billion euros, while sales in Asia decreased 12.1 percent to 596 million euros.

Sales in the rest of the world grew 8 percent to 839 million euros in the same period.

(China Daily May 10, 2007)

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