Zong Qinghou

Danone still hopes to mend ties with Wahaha despite row

PUBLISHED : Wednesday, 13 June, 2007, 12:00am
UPDATED : Wednesday, 13 June, 2007, 12:00am


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French food giant Groupe Danone still hopes to patch up the rift with its joint-venture partner Wahaha Group despite an increasingly bitter and public dispute over alleged contract violations.

The dispute emerged as Danone sued Wahaha for allegedly breaching their joint-venture agreement. In response, Wahaha chairman Zong Qinghou accused Danone of using the lawsuit as a ploy to take over the successful ventures.

Danone has a 51 per cent stake in the joint ventures and Wahaha holds the remainder, although the French company exercised little control over daily operations.

'We also continue to believe that, with appropriate and adequate government support, an amicable solution is still a possibility,' said Emmanuel Faber, Danone's president for Asia-Pacific and the new chairman of the ventures.

Danone claims Mr Zong, founder of Hangzhou-based Wahaha, set up 20 firms that make and sell products in competition with their ventures.

The unauthorised companies have hurt sales of the joint ventures, which accounted for about 25 per cent of the total, Mr Faber said.

It filed a lawsuit last week in a California court because one of the companies involved was led by Mr Zong's daughter, a US citizen, Danone said. Danone is also seeking arbitration in Stockholm.

Danone wants Mr Zong to abide by what it claims is an agreement reached last year to sell it a 51 per cent stake in the unauthorised companies, thus bringing them under the umbrella of the joint ventures.

But Mr Zong described the proposed deal as a 'hostile takeover' attempt by Danone.

He resigned as joint-venture chairman last week in protest against the lawsuit and criticised the foreign partner in an open letter.

Mr Faber said the lawsuit would continue until a solution was reached and suggested that Danone had future options for litigation, including through mainland courts.

'At the end of the day, our objective is to get our fair ... share of the pie. We don't want to destroy the pie,' he said, adding Danone preferred to keep the current shareholding structure intact.

Employees at three factories had signed a petition supporting Mr Zong and were demanding reassurances about the future of the venture and their jobs, Xinhua said.