Danone and Wahaha

I will talk about the joint venture of Danone and Wahaha in the late 90s. I will first introduce these two corporates’ background and their motivation of joint venture.

Danone is a world leading Food Company based in Paris and has 4 business lines, they are: Fresh Dairy Products, Waters, Early Life Nutrition and Medical Nutrition.

Many famous food and drink brands are actually under Danone, one of them is EVIAN, the mineral water. They also have some yogurt brands like Densia and danio, which are popular in America and Europe.

Wahaha was founded by Zong Qinghou in 1989 with a fast growth and a large sales volume. In 2009, Wahaha contributed over 50% market share in the beverage production.

In this table, it showed that why they would have the Joint venture. It is because Danone already was an active player in the Chinese market. China was already the largest market for Danone’s international businesses. Danone wanted to keep the large share of China market. And the co-operation reason of Wahaha was so clear. They were looking for financial resources, and also the higher level of technological and management skills. Therefore when Danone approached Wahaha, they made the decision of the joint venture.

In the beginning, there were 3 parties participated in the joint venture. Danone and a Hong Kong company named “Bai Fu Qin” set up a new company called Jin Jia Investment together, to co-operate with Wahaha. Wahaha held 49% of share which Jin Jia held 51%. But we could say Wahaha was the largest shareholder as Danone only held 41% share in this Joint venture.

However, the situation was changed after 2 years. Bai Fu Qin has bankrupted in 1998 and sold 10% share to Danone. Danone became the majority shareholder, which meant Danone could control all major decisions in this Joint venture.

Those changes made the conflicts between Wahaha and Danone appeared. Wahaha felt Danone misled them from the very beginning. Wahaha then created some companies that sold the same products as the Joint Venture, and using the trademark of Wahaha. As the creation of the non-joint venture companies violated both trademark license and Joint venture Agreement, Danone wanted to purchase this ownership interest of the non-joint venture from the Wahaha Group. But Wahaha refused to make the transfer.

As the negotiations have broken down, they brought those matters to the court. They carried out 10 lawsuits in and out of China in 2 years. The lawsuits brought by Danone against Wahaha’s non-joint ventures all ended in failure. Danone finally exited its China joint venture with Wahaha.