The rancor between Wahaha, China's leading beverage company, and
its multinational partner Danone has been grabbing headlines since
early this month.
It is unfortunate that an international business marriage that
was hailed as one of the great success stories of joint ventures in
China has turned sour.
Given the sea change that has taken place in China's business
climate in recent years, it is not all that surprising that a once
perfect couple may think different now.
Danone's joint venture with Wahaha was first signed in 1996 to
sell water, yogurt and tea drinks. Both sides profited richly as
Wahaha water became the leading brand in the China market.
Zong Qinghou, founder and chairman of Wahaha, now ranks among
China's richest. For Danone, the joint venture accounted for more
than 5 percent of operating profits last year.
Although there have long been disagreements between the two
sides, the tensions threatening to tear apart the 10-year joint
venture only burst into the open recently.
Zong accused Danone of trying to take control of certain Wahaha
subsidiaries that are not part of the joint venture.
Danone hit back by accusing Wahaha of setting up a parallel
operation that bottled and sold the same drinks as the joint
venture. It also began legal proceedings against the Chinese
group.
With a 51-percent stake, Danone technically has a decisive say
in the joint venture. But as the influential chairman and general
manager of the joint venture, Zong appears an inseparable driving
force behind the entire Wahaha business.
Unfortunately, Zong's playing the card of "the country's
economic security" sounds not only irrelevant but foolish. His
emphasis on Wahaha as a Chinese brand is not as convincing as he
might have expected.
The case should be addressed in a manner that puts business
interests first as long as they are legal. Such a solution will not
only be fair to both sides but also set an example for other joint
ventures in the country.
(China Daily April 19, 2007)