Wahaha chief quits venture with Danone

PUBLISHED : Friday, 08 June, 2007, 12:00am
UPDATED : Friday, 08 June, 2007, 12:00am

Zong Qinghou takes partner to task

The chairman of a troubled joint venture between Hangzhou Wahaha Group, the mainland's largest beverage company, and France's Groupe Danone has stepped down and added fire to a public battle between the two partners by accusing the French of reaping benefits without doing their share of the work.

Zong Qinghou, who resigned as chairman of Wahaha Joint Ventures, will be replaced by vice-chairman Emmanuel Faber.

'It was very hard to work with people who do not understand the Chinese market and culture,' Mr Zong said in a damning letter sent to the media. 'They don't want to take risks and follow through on their responsibilities and they always want benefits from others and have done nothing to help the joint venture.'

The clash is being watched by global businesses as a barometer of the investment climate in the mainland and is viewed by many foreign investors as an example of how wrong a partnership can go if not properly managed.

Danone, the world's leading yogurt maker, said in a statement that it looked forward to developing the joint venture, which began in 1996.

'Danone's objective has been, and will always be, to ensure the development of [joint-venture] companies, their brands and employees,' Mr Faber said.

The French company declined to comment further on the case.

The dispute between Danone and Wahaha became public several months ago when Mr Zong publicly rejected a plan by Danone to buy out some of Wahaha's assets, accusing the French company of attempting a hostile takeover.

He said he had remained in his position for one year longer than planned and had attempted to resign on May 9 but the government had asked him to stay.

Mr Zong accused Danone of resorting to personal attacks when its buyout attempt failed and of hiring private detectives to keep him under surveillance. 'If there is any problem, [Danone] could talk to me, or resolve it in court. There's no need to harm my wife and daughter and destroy my family life.'

Danone this week filed a US lawsuit against units of Wahaha, alleging the company illegally sells 'products which are the same as those sold by Wahaha joint ventures and is making unlawful use of the joint ventures' distributors and suppliers'.

Danone has also filed for arbitration in Stockholm to help resolve the dispute.

Danone is only the latest of a long string of companies that have run into difficulties with mainland joint-venture partners as changing business conditions cloud initial intentions for their projects.

'For a Chinese business partner, their ultimate objective is probably not to establish a joint-venture company with a foreign partner and then make this joint venture profitable,' said Ben Miao, a senior associate at law firm Clifford Chance and a disputes specialist. 'Their endgame is probably to acquire advance technology, know-how and management skills from foreign investors to serve their other businesses.'

Wahaha sells mineral water, tea, fruit juices and baby milk under the brand Wahaha.

The China Business News earlier reported that Wahaha cut the joint venture's sales growth forecast for this year to 3 per cent from almost 24 per cent in the first four months.

Additional reporting by Tom Miller in Beijing