Wahaha Says Na Na Na to Danone

Tuesday, April 10, 2007 8:55

Wahaha waterShanghai Daily is reporting that Wahaha has rejected a a 4 billion bid by Danone for a controlling stake in the groups it is not currently invested in.

Wahaha, a Hangzhou based company, is most well known for its 1 kuai water bearing the same name, and with over a billion bottles served it has the #1 brand spot in China (according to Gallup 10 year study).

according to the report:

Danone’s plan, if realized, would give the joint venture the exclusive right to produce, distribute and sell food and beverage products under the Wahaha brands.

Further:

Danone has acquired stakes from at least five dairy and drinks companies in China over the past 20 years, including Robust Group and Bright Dairy & Food Co.

and that part of this lies in the fact that there is a concern that Danone would hold a monopolizing position if the deal had been completed.

Not the first time a French company appeared overconfident (read aggressive) in their approach, the CEO on Wahaha is quoted as saying:

“The price is undervalued and the contract is unfair with almost no obligations required for Danone,” said Zong, “It’s a vicious takeover and Chinese companies need to develop on our own.”

and…

Wahaha has urged the Chinese government to issue regulations against foreign companies’ hostile acquisition to protect local brands, according to the statement.

Ouch…
Food security is something that the government takes seriously in China, and there is no doubt that the government will not allow a monopolistic position in the food market (especially bottled water). So,it will be interesting to see if further reports surface about the deal structure changing significantly, if others come out to support him, or if any regulations related to food producers.

For the most up to date information on food and agriculture though, I highly suggest readers go to the USDA’s Foreign Agriculture Service site. There is great data and research on there for all.

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4 Responses to “Wahaha Says Na Na Na to Danone”

  1. rbrubaker says:

    April 11th, 2007 at 12:36 am

    Round 2 looks like it will play pretty quickly as the Financial Express is reporting in its article Danone May Take Chinese Partner to Court

    The report is short, so not a lot to glean, however what I found more interesting was that Danone was not happy that Wahaha had:

    breached an agreement by setting up companies outside its ventures with Danone and using the Wahaha brand without Danone’s approval

    While not specifying if this was a competitive product, I am shocked to think that Danone would have been able to get this right as part of any investment, and unless it is deemed to be a competitive product I doubt the Chinese courts will uphold the rights of Danone to control the Wahaha name or its ability to offer new products.

  2. rbrubaker says:

    April 15th, 2007 at 8:54 pm

    Siwei Zhong has also written a very good piece on this Danone Gives Wahaha A Hard Trademark Lesson.

  3. Danone Says NaNaNa to Wahaha | All Roads Lead To China says:

    June 6th, 2007 at 12:50 am

    […] and two organizations related to the Wahaha. It has been almost 6 weeks since we originally posted Wahaha Says Na Na Na to Danone, and after his original nationalistic public relations campaign, it appears that Wahaha’s CEO […]

  4. Zhou Ji-Ming says:

    November 23rd, 2007 at 5:00 pm

    Danone has gained ground in this fight. If you noticed the piece last week (http://www.china.org.cn/english/business/231866.htm), then it is clear that Danaone has done several things right in the past few months.

    1) Identified Zong’s assets off-shore, shareholders, accounts, etc.

    2) On the basis of the progress generated in cases in those jurisdictions, Danone has btained orders from Stockholm arbitration and U.S. Federal Court in L.A. which freeze in place all those off-shore assets.

    3) Caused great concern among those fellow shareholders who could presumably, along with Zong, be prosecuted as tax cheats at home in China.

    At this point, the momentum appears to be shifting. Word on the street is that, in the interest of putting this behind them, the national leaders have called Zong to Beijing to settle this.