DANONE WAHAHA

8/4/2019 DANONE WAHAHA

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Danone and Wahaha: A Bitter-Sweet PartnershipNegotiations to Gain a Share of the Non-JVs:

Dec. 9, 2006Franck Riboud, Danoneschairman signed a legal agreement with Zong.It provided for the integration of the non-JVsinto the JV. i.e. Danone would acquire a 51%stake in the non-JVs for RMB 4 billion($544million).

However, Zong rejected the offer later on.


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Danone and Wahaha: A Bitter-Sweet Partnership

The Public Saga

April 3, 2007-an article entitled Wahaha Victim ofLow-ball Buyout by Danone was published on the

website of Xinhua which generates heated publicdebate.

April 5, 2007-Danone held a press conference inShanghai saying that its proposed acquisition of 51%of the non-JVs was in compliance with relevant lawsand regulations in China.


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April 8, 2007 Zong said that because of hisignorance of the importance of trademark and brand,the development of Wahaha fell into a trap designed

by Danone.

April 9, 2007-Danone send a formal letter to theChairman of the Danone-Wahaha JV requesting legal

action against Wahaha for illegal competition andunlawful use of the Wahaha trademark, with a graceperiod of 30 days.


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Danone and Wahaha: A Bitter-Sweet PartnershipMay 9 2007-Danone filed a case for arbitrationagainst Zong and Wahaha in Stockholm.

June 4, 2007-Danone filed suit in Los Angelessuperior court against Ever Maple and Hongsheng, aswell as Zongs wife and daughter who ran the twocompanies.

June 5, 2007-Zong resigned as chairman of the JVs.


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November 10, 2007-Habgzhou ArbitrationCommittee ruled that Danone had failed to file alawsuit within a reasonable time to settle the dispute

of the trademark transfer.

The Wahaha labour union accused Danone of holdingshares in companies that competed with the 39

Danone-Wahaha JVs.


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December 18, 2007-Danone announced theautomatictermination of its agreed JV with MengliuDairy Group because some of the conditions and

prerequisites had not been met within the agreedtimeframe

December 21, 2007-under political pressure fromtheir respective governement, Danone and Wahahaagreed to suspend their legal battle and resumenegotiations.


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CONFLICT - RESOLUTION Different attitudes

towards key issues in theformation and operation

of the joint venture,major differences inbusiness culture andexpectations as to howbusiness should and isbeing conducted.

Danone could haveassumed zeroknowledge of how

things work in Chinaand attempeted toadjust to working inChina the Chines wayrather than followingwhat they usuallypractice elsewhere.


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Danone and Wahaha: A Bitter-Sweet PartnershipCONFLICT - RESOLUTION

It seems that the ChineseWahaha expectationswere that their 49% of the

JV meant full control, asthe other 51% were splithalf-half between Danoneand Peregrine through theSingapore registered Jinjia.

Danone later took overPeregrines part gaining

51% of the JV

The two companies lacked

communications.

Discuss and ensure thatall parties understandthe structure andpossible changes incontrol over the JV.

Focus on building asense of trust andmutual respect between

partners that go beyondthe legal bond.

Both parties contibutesand gains from the JV.


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CONFLICT - RESOLUTION Trademark control

Wahaha, initially being astate-owned company,

refused the transfer oftrademark rights to the new

JV although this was initiallythe basis for which the JV

was formed upon. Constant attempt by

Danone to adhere theChinese to western use

of legal maneuvers andethics

Ensure a solid local legalfoundation to the JV andtry to clarify all possible

misunderstandingregarding interpretationand usage of JV assets.Reach a mutualunderstanding between

JV partners and gainsupport to the agreementwith the local authorities.


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CONFLICT - RESOLUTIONManagement structure.

Effective control of dailyoperations was handed to

Zong and Wahaha, as thelocal China experts, whilethe only involvement ofDanone had was throughthe board of directors.

Danone was attempting toempower the localpartner and was not fullyaware of the potential

implications.

All parties should beinvolved in the JV dailyoprations through

extensive mutualcollaborations. Having aChinese partner shouldnot serve as an excuse forstaying passive.


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CONFLICT - RESOLUTION . .


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Background:


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Background:

Documents

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