versus
Lessons for Joint Ventures in China :
A Happy Marriage but Painful Divorce
by Sacha Milchten & Antoine Ryckebusch
Company Presentation
 Founded in 1987
 Hangzhou Wahaha Group
Co. Limited owned by the
government of Hangzhou's
Shangcheng District.
 Founded in 1973 from the
merger of Boussois-SouchonNeuvesel and Gervais Danone
 1979 – 1985 : acquisition of
Amora, Maille, La Pie Qui
Chante, Carambar…
 Zong Qinghou : Chairman and
managing director
 In 1995, Peregrine
Investments Holdings
introduced Zong to Danone,
and discussions about joint
ventures began.
 CEO : Franck Riboud
Who are the customers?
More than 1,500 first-level dealers
12,000 second-level dealers
35 provincial sales offices
2,500 sales team employees
2 million sales outlets across China
Suppliers
Important role of the water bottle
Kind of water
Exclusive deals with suppliers
Supplier relations
Who are the competitors?
 Coca-Cola Co.
 PepsiCo, Inc
 Taiwan-founded companies Uni-President
Enterprise Corp. and Tingyi (Cayman Islands)
Holding Corp.
 Success of Future Cola
 Not worry too much about domestic competition
 Imitations
What are the Key Success Factors of
this business?
 Being good and tasty
 Being a trustmark
 Product quality
 Find the good chinese partner
 Innovation
 Culture differences and Relations
To what extent are these KSF mastered
by the company
✔ Product quality
✗✔Culture
differences
Innovation
✔✔
Find
the
good
chinese
partner
and
Relations
good
and tasty
✔Being
Being
a trustmark
The Case :
Danone versus Wahaha:
Lessons for Joint Ventures in China
A Happy Marriage but Painful Divorce
Video
Background : Formation of the joint
venture
 Established first JV in 1996
Danone owned 51%(invest $170 million) and Wahaha owned
49% of the shares.
 Wahaha Group becomes a private company… But the
trademark belongs to the state !
Management of the JV and the creation
of competing non-JV companies
 Management of the JV from one of the richest men in China :
Zong
 The conflict : Creation of a series of companies that sold
the same products as the JV and used the Wahaha
trademark
Arbitration and Lawsuits
One of the arguments of Zong’s :
 The JV agreement of 1996 was unfair.
 Danone had intention to control China’s beverage market.
 Foreign mergers and acquisitions should go through the
anti-monopoly check. ( China should promulgate AntiMonopoly Law as soon as possible.)
 Dispute on the Wahaha Brand
Lessons to be learned
 Don’t use technical legal techniques to assert or gain
control in a JV
 Do not expect a 51% ownership interest in a JV will
provide effective control
 Do not proceed with a JV formed on a weak legal basis :
the brand name.
 The foreign party must actively supervise or participate
in the day-to-day management of the JV
Danone today in China
 Danone breaks up with Wahaha Group .
 With the end of the JV, Danone focus on other markets.
 Danone has continued to pursue this strategy, and has
joint ventures with companies.
The Chinese beverage company's
expansion is no laughing matter
 « Thank you Danone ! »
 From milk to Future Cola
 A"patriotic" brand soon international ?
Sources
 Wahaha : l'empire contre attaque ! www.aujourdhuilachine.com
 Steven M. Dickinson on the lessons to be learned from the tensions
within China’s largest beverage joint venture
www.chinaeconomicreview.com/cer/2007_09/Danone_v_Wahaha.
html
 L'implantation de Danone sur le marché chinois http://danone-en-
chine.wikeo.be/a.html
 The Chinese beverage company's expansion by Paula M. Miller
www.chinabusinessreview.com/public/0409/company_profile.html
Thank you !
Q&A…