There is further evidence of Groupe Danone’s disenchantment with its joint ventures in China after the French food and beverage giant withdrew from its JV with a second Chinese dairy producer – and the long-running dispute between Danone and its Chinese beverage partner Wahaha dragged on into a new chapter.
Danone said it had agreed with the country’s top dairy company, Mengniu, to end their year-old deal to sell yogurt in Inner Mongolia, Beijing and Ma’anshan. According to Danone, the co-operation had not developed as planned. However, Mengniu will continue to work with Danone as a co-packer and distributor.
In October, Danone also sold back its 20% stake in Shanghai’s Bright Dairy, and ended a 15-year brand and technology agreement with the company. Meanwhile, there is still no sign of the Wahaha dispute being settled.
In the latest development, Danone is being sued for $1.4 million damages by Wahaha’s labour union, which represents about 7,000 workers in the group’s joint ventures with the French company, and a further 10,000 workers in non-JV operations.
The union accuses Danone of holding shares in rival companies, and harming Wahaha’s reputation by “distorting facts” through the media. Danone dismissed the complaints as “groundless,” and said it hoped to reach an “amicable solution.”
The Wahaha dispute began when Danone accused the group’s founder, Zong Qinghou, of using other companies to sell products rightly owned by the JV (which is 51% owned by Danone). Zong denied the charge, and in turn accused Danone of trying to take control of the Wahaha brand, a market leader in bottled water, tea and other beverages.
Danone was “shocked” by the ruling of a Chinese arbitration tribunal, earlier this December, that Zong was entitled to use the brand outside the JV. Although Danone refuted the tribunal’s finding, the company offered to suspend its own legal actions against the Wahaha group, and appealed to Zong to make a move towards reconciliation.
“We urge all the parties to avoid taking any actions which will further intensify or complicate the situation,” said Danone in a formal statement.
In November, Danone’s management said that its troubles in China had changed its view of how to grow in such emerging markets. In future, it is expected the company will seek to set up or acquire its own operations, rather than going into business with a local partner.
Danone has just entered the Chinese baby food sector through the Dumex brand, which it acquired with its takeover of Dutch manufacturer Numico.
© FoodBev Media Ltd 2019