Danone V Wahaha (A): Who is Having the Last Laugh?
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Publication Date:
June 12, 2008
Source:
University of Hong Kong
In April 2007, Zong Qinghou, founder of Hangzhou Wahaha Group and chairman of all its joint ventures formed with Danone, divulges details about Danone’s plan to buy a 51% interest in Wahaha’s non-joint venture subsidiaries and related entities that are owned or managed by Zong’s family interests. The disclosure of what is supposed to be a trade secret sparks off a series of public accusations, followed by lawsuits by each partner against the other. On the one hand, Danone indignantly retorts that its takeover plan is grounded in a breach of its contractual interest by Zong. Danone alleges that Zong has been making many of the same products as the joint ventures have under the same “Wahaha” trademark through a parallel network of production facilities that he or his family own or manage. He also uses the joint ventures’ distribution channels for selling them. On the other hand, Zong argues that the “Wahaha” trademark has never officially been transferred to the joint ventures and complains of Danone’s lack of effort throughout. He also accuses Danone of attempting to monopolise China’s beverage market by driving out national brands like Wahaha, which are part of China’s cultural heritage and thus are the heart and soul of Chinese people. As a way of protesting, Zong resigns from his post as chairman at the joint ventures. Danone then appoints Emmanuel Faber, chairman of Danone Asia Pacific, as the new chairman, but the legitimacy of this appointment is denied by Wahaha. This case illustrates the conflicts in interests, practices and cultural values that foreign investors may encounter with their local partners when doing business in China. It also examines the dynamics of revenue sharing, control rights and contract enforcement between foreign and local partners.
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Danone V Wahaha (A): Who is Having the Last Laugh?
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