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versus

versus. Lessons for Joint Ventures in China : A Happy Marriage but Painful Divorce. by Sacha Milchten & Antoine Ryckebusch. Company Presentation. Founded in 1973 from the merger of Boussois-Souchon-Neuvesel and Gervais Danone

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versus

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  1. versus Lessons for Joint Ventures in China :A Happy Marriage but Painful Divorce by Sacha Milchten & Antoine Ryckebusch

  2. CompanyPresentation • Founded in 1973 from the mergerof Boussois-Souchon-Neuvesel and Gervais Danone • 1979 – 1985 : acquisition ofAmora, Maille, La Pie Qui Chante, Carambar… • Founded in 1987 • Hangzhou Wahaha Group Co. Limited owned by the government of Hangzhou'sShangcheng District. • ZongQinghou : Chairman and managingdirector • In 1995, PeregrineInvestments Holdings introducedZong to Danone, and discussions about joint venturesbegan. • CEO : Franck Riboud

  3. Who are the customers? • More than 1,500 first-level dealers • 12,000 second-level dealers • 35 provincial sales offices • 2,500 sales team employees • 2 million sales outletsacross China

  4. Suppliers • Important role of the water bottle • Kindof water • Exclusive deals with suppliers • Supplier relations

  5. Who are the competitors? • Coca-Cola Co. • PepsiCo, Inc • Taiwan-founded companies Uni-President Enterprise Corp. and Tingyi (Cayman Islands) Holding Corp. • Success of Future Cola • Not worry too much about domestic competition • Imitations

  6. What are the Key SuccessFactors of this business?  • Being good and tasty • Being a trustmark • Product quality • Find the good chinesepartner • Innovation • Culture differences and Relations

  7.  To whatextent are these KSF mastered by the company ✔ Product quality ✗Culture differences and Relations ✔ Innovation ✔Find the good chinesepartner ✔ Being good and tasty ✔ Being a trustmark

  8. The Case : Danone versus Wahaha: Lessons for Joint Ventures in ChinaA Happy Marriage but Painful Divorce

  9. Video

  10. Background  : Formation of the joint venture • Established first JV in 1996 Danone owned 51%(invest $170 million) and Wahaha owned 49% of the shares. • Wahaha Group becomes a private company… But the trademark belongs to the state !

  11. Management of the JV and the creation of competing non-JV companies • Management of the JV from one of the richest men in China : Zong • The conflict : Creation of a series of companies that sold the same products as the JV and used the Wahaha trademark

  12. Arbitration and Lawsuits One of the arguments of Zong’s : • The JV agreement of 1996 was unfair. • Danone had intention to control China’s beverage market. • Foreign mergers and acquisitions should go through the anti-monopoly check. ( China should promulgate Anti-Monopoly Law as soon as possible.) • Dispute on the Wahaha Brand

  13. Lessons to belearned • Don’t use technical legal techniques to assert or gain control in a JV • Do not expect a 51% ownership interest in a JV will provide effective control • Do not proceed with a JV formed on a weak legal basis : the brand name. • The foreign party must actively supervise or participate in the day-to-day management of the JV

  14. Danone today in China • Danone breaks up with Wahaha Group . • With the end of the JV, Danone focus on other markets. • Danone has continued to pursue this strategy, and has joint ventures with companies.

  15. The Chinese beverage company's expansion is no laughing matter • « Thankyou Danone ! » • From milk to Future Cola • A"patriotic" brand soon international ?

  16. Sources • Wahaha : l'empire contre attaque ! www.aujourdhuilachine.com • Steven M. Dickinson on the lessons to be learned from the tensions within China’s largest beverage joint venture www.chinaeconomicreview.com/cer/2007_09/Danone_v_Wahaha.html • L'implantation de Danone sur le marché chinoishttp://danone-en-chine.wikeo.be/a.html • The Chinese beverage company's expansion by Paula M. Miller www.chinabusinessreview.com/public/0409/company_profile.html

  17. Q&A… Thankyou !

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