Wahaha chairman points out where east does not meet west

PUBLISHED : Monday, 09 July, 2007, 12:00am
UPDATED : Monday, 09 July, 2007, 12:00am

Despite 11 years of working together, a vast cultural divide has been the key factor behind the messy split between French beverage giant Danone Groupe and Hangzhou-based Wahaha Group, according to the Chinese company's chairman Zong Qinghou.

Since the dispute between Wahaha and Danone became public in April, the media has become a platform for the two companies to exchange insults and accusations.

'We worked with Danone because Wahaha wanted to improve more quickly. We aren't lacking money or manpower. Therefore, Wahaha and Danone should be complementary to each other, not leader and subordinate.'

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

Wahaha recently said it planned to sue Danone for up to Euro5 billion (HK$53.26 billion) for 'illegal activities'. Mr Zong said he planned to sue Danone's three China executives for violating the agreement between the two companies.

He said that Danone's allegations in the lawsuit arose from a dispute which started late last year after Danone failed to acquire the Wahaha units operating outside the joint venture.

'We did sign a letter of intent for the acquisition. But bear in mind it was not a contract. Nothing has been confirmed and finally some of the shareholders of those units disagreed with selling stakes to Danone. Everything proceeded in a legal way,' Mr Zong said.

Legal wrangling aside, he said the differences between Chinese and foreigners were the reason for the clash between Danone and Wahaha. He painted a picture of a foreign giant which prevented Wahaha from developing to its full potential.

'Danone doesn't want Wahaha to be a big beverage company in China, it only wants its partner to obey,' he said. 'Wahaha wanted to expand from two production lines to seven but Danone didn't want to work on it.'

Danone's co-operation with other mainland companies and its acquisition of Wahaha competitor Robust, the largest beverage maker in southern China, was a kind of betrayal, he added.

Although the Hangzhou local government is a shareholder in the joint venture, it has largely stayed out of the dispute.

'The Hangzhou government doesn't want us having a verbal battle. It suggested Wahaha remain silent in order not to hurt the Sino-French relationship. However, I decided the issue should be disclosed to the public. I couldn't bear it anymore,' Mr Zong said.

Wahaha's lawyers sent a letter to Danone at the end of last month, claiming that the appointment of Danone's Asia-Pacific chief Emmanuel Faber as the new chairman of the joint venture was illegal.

He resigned as chairman of the joint venture following the lawsuit: 'This is the best solution as I may need to be involved in legal matters with Danone for the rest of my life.'

Additional reporting by Bill Savadove in Shanghai