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Danone threatens legal action against Wahaha

By Wang Zhenghua (China Daily)
Updated: 2007-04-12 08:37

SHANGHAI: French food giant Group Danone SA has notified the founder of Chinese partner Wahaha that it intends to take legal action against the firm, a company executive said yesterday.

Deeply embroiled in anacquisitionrow with China's biggest beverage producer, Danone wants a quick solution to quench "public rumors" and respond to growing calls to protect the domestic brand.

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"We mean to end this soon because the public disclosure and rumors bring no good to anyone involved in this, including Zong Qinghou, chairman of Hangzhou Wahaha Group," Emmanuel Faber, president of Danone Asia-Pacific, said yesterday.

At yesterday's news conference in Shanghai, Danone accused Wahaha of violating a non-competitive clause in a joint venture contract signed in 1996 by secretly setting up sales companies that directly competed with the venture.

Danone had 51 percent of the joint venture with Wahaha and reached an agreement barring the Chinese company from making products that competed with those produced by the venture, or from using the Wahaha brand without Danone's consent.

Danone said the agreement was just and fair as Zong, the president and general manager of the joint venture, had received a salary, bonus and significant incentives over the past 10 years in exchange for the non-competitive clause.

"Zong is using public opinion to serve his personal interests," Faber said.

Danone said it had discovered the violation after 10 years and moved to acquire stakes in the non-joint ventures separately developed by Wahaha. Zong said earlier the French company had planned to offer only 4 billion yuan and called the deal "malicious".

Wahaha was unavailable for comment. But Zong has told Chinese media on several occasions that he is firmly opposed to the acquisition plan.

"We are preparing for the litigation and sent the notification letter on Monday to Zong," said Faber, adding that the legal action would take effect in 30 days from sending the letter.

But Faber was quick to add that his company, the world's largest yogurt maker, was hopeful the dispute could be resolved peacefully and it was "creating a time frame" to address the issue.

Danone said its global consolidated after-tax earnings stood at 1 billion euros in 2006, with profit from the Asia-Pacific region accounting for around 20 percent and its joint venture with Wahaha about 3 percent.

(China Daily 04/12/2007 page14)