just the facts – Danone, Wahaha dispute
Danone said yesterday (30 September) it has agreed to sell its 51% stake in a joint venture with China's Wahaha, bringing to an end their long-running dispute and years of court battles across the globe. Here we look at five facts on the two companies.
Hangzhou Wahaha Group was founded around 20 years ago by Zong Qinghou, a man known as a "legend in China business". Wahaha, which signifies "laughing child" in Chinese, started out as a private group of companies, and one of the largest beverage producers in China. The company is headquartered in Hangzhou, Zhejiang province. It was Qinghou's leadership and vision that enabled Wahaha to gain a 23% share of the bottled water market in China, surpassing Coca-Cola.
Groupe Danone is a French food and beverage company, which has built global brands such as Danone and Evian. In addition to its 39 joint ventures with Wahaha, Danone has several more beverage joint ventures in China, including a 49% interest in China Mengniu Dairy Co.,China's biggest milk producer , which it acquired at the end of 2006. Danone owns a number of other water brands worldwide. In Asia, it has acquired Yili, Aqua (Indonesia), and Robust (92%), and has a 51% holding in China's Wahaha Joint Venture Company, giving it a total market share of 20%.
In 1996, Danone established five joint ventures with Wahaha, in which it gained a 41% interest. During the Asian financial crisis, Danone then increased its stake to 51% by acquiring the shares of a Hong Kong company, which also had ownership in Wahaha. At the time of the joint venture formation, Wahaha sales were US$120m. Earlier this year, the company said it expects sales to reach a record RMB50bn (US$7.3bn) in 2009 and that it aims to double this in three to five years.
The dispute between the two companies began when Qinghou began establishing a parallel set of companies over the last few years, selling products in direct competition with Wahaha. When Danone noticed a slowdown in sales at Wahaha, it confronted Qinghou and offered to buy 51% percent of his companies for a reported $525m.
Qinghou refused the offer and so Danone took two of his companies to court in the US. Qinghou initiated arbitration proceedings in Hangzhou, Wahaha's home city but then resigned from Wahaha. The joint venture became embroiled in a complicated legal and process and became one of the most visible disputes between partners in a China joint venture. Danone yesterday (30 September) agreed to sell its 51% stake in the joint venture with Wahaha, bringing to an end their long-running dispute.
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