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Danone, Wahaha reach a settlement in beverage dispute

By Xiao Yu (China Daily)
Updated: 2009-10-05 07:00

Chinese beverage giant Wahaha Group announced that it had settled a legal dispute with Groupe Danone SA, with the French food and beverage group agreeing to sell its 51 percent stake in the Danone-Wahaha joint venture to its Chinese partners.

The two companies reached an "amicable settlement" with "the support of both the Chinese and French governments", Hangzhou-based Wahaha Group said in a statement.

Neither Danone nor Wahaha discussed a price tag for the sale.

China's Caijing Magazine reported that the sale fetched 300 million euros ($438 million). That would be less than a fifth of the $2.6 billion that Wahaha lawyers said Danone demanded when arbitration to end the dispute began last year.

The agreement is still subject to approval from the Chinese government, said a spokesman for Wahaha.

According to a press release posted at Danone's website, Danone and Wahaha will conclude their existing joint venture relationship.

All legal proceedings related to the disputes between the two partners will be ended when the agreement is approved and conditions of the settlement are met, according to the press release.

A spokesman for the Ministry of Commerce said that the government had taken part in discussions between Danone and Wahaha, declining to provide more details.

The settlement ends a lengthy row over Danone's complaint that Wahaha Group was running separate businesses selling Wahaha-branded drinks.

Danone complained that the actions competed directly with their 39 joint ventures, which Danone alleged was a violation of the joint venture agreements.

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Wahaha's multimillionaire founder and chairman, Zong Qinghou, had portrayed his company's quest to control its brand name as a patriotic cause.

Wahaha, which means "laughing children" in Chinese, is one of China's best-known national brands for bottled water and other beverages.

"The collaboration between Danone and Wahaha helped to build a strong and respected leading enterprises in the Chinese beverage industry," said Frank Riboud, CEO and chairman of Danone.

"We are confident that Wahaha will continue its successes led by its future new management crew," Riboud said.

Riboud said that since Danone entered the Chinese market in 1987, the company has been highly committed to its Chinese business and will accelerate its growth in the country despite the end of the joint venture.

Danone established its joint venture with Wahaha in 1996 to produce bottled water, tea and juices under the Wahaha brand.

Since May 2007, Danone has filed more than 21 lawsuits seeking control of the $2.4 billion brand of Wahaha beverages in several different countries, including the British Virgin Islands, Sweden, France, Italy and the United States. However, Danone has won no victories in its legal battle.