Zong Qinghou

Wahaha-Danone tensions spread to factory floor

PUBLISHED : Saturday, 09 June, 2007, 12:00am
UPDATED : Saturday, 09 June, 2007, 12:00am


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Rising tensions between Paris-based Groupe Danone and Hangzhou Wahaha Group over their troubled joint venture has spread to the factory floor, with Chinese workers rejecting the new French chairman of the partnership.

Hangzhou's sales team yesterday launched a tirade against the new leadership of the venture, saying the mainland beverage business should remain under the control of Wahaha founder Zong Qinghou.

'Danone, we reject you,' one of a series of employee letters said. 'We seriously warn Danone and its flunkies that we will punish your sin and we want only chairman Zong to lead us, not Danone.'

Mr Zong this week stepped down as chairman of the joint venture and was replaced by vice-chairman Emmanuel Faber. Danone earlier filed a lawsuit against Wahaha in a US court, accusing the mainland company of making unlawful use of the ventures distributors and suppliers.

'We really don't understand why Danone will let someone who doesn't know sales and doesn't understand the China market become president of the joint venture,' said another letter signed by the company's national distribution representatives.

The battle between the French maker of Evian water and China's largest beverage company is seen as another example of the risks foreign investors take when they partner with mainland companies.

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

Wahaha statements have begun to take a strident nationalistic tone, an approach that business experts say will gain Mr Zong and his company little ground.

'We will never accept the new chairman appointed by you,' one letter said. 'The fight has begun! Remember, the Chinese are tolerant but not easily bullied.'

Guyon Varch, the press consul at the French embassy in Beijing, said such disputes were all part of doing business in China and that Danone was not the first foreign company to run into difficulties.

'It is a problem between two private companies,' Mr Varch said. 'There is no concern that it will become a diplomatic issue - though the Chinese authorities are afraid that it will project a bad image for Chinese companies. The feeling in China is that Mr Zong was ill-advised to play the nationalist card.'

Danone has remained tight-lipped about the case. In a statement released when Mr Zong was replaced as chairman, the company said its objective remained 'to ensure the development of [joint-venture] companies, their brands and employees'.

Additional reporting by Tom Miller and Jasmine Wang