Danone vs. Wahaha: A Battle for the Ages?

Tuesday, June 12, 2007 21:58
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For those of you who love a good knock down drag out fight… or hockey… then I think we are in for a show.

As a review: Wahaha’s former CEO Mr. Zong a few weeks ago rallied his troops when Danone accused him of circumnavigating their joint venture agreement. Regardless of whether Danone intended it to go public or not, Zong went public… and threw out the mother of all trump cards. Chinese nationalism… and if was effective. Wahaha’s employees signed petitions and stated their loyalty to Zong, the founder of Wahaha.

Round 2: Danone takes Wahaha to court in California (I am still trying to work out the jurisdictional precedent there – see Danone Says Na Na Na to Wahaha for full writeup

Round 3: Zong resigns – see Zong Resigns from Wahaha for full writeup

and now…

Round 4: Wahaha employees take to the streets

Today’s report that “dozens” of Wahaha employees took to the streets in the China Daily article Workers rally behind Wahaha should leave no doubt in Danone’s mind that they need to tried lightly.. even if they have the goods on Zong.

The most interesting quote from the protest comes from Emmanuel Faber, Danone’s managing director for Asia

“You think the group of people that tried to prevent me from attending this news conference in front of this building has learned by themselves that Danone has a news conference this morning here?”

As I pointed out on the CLB post Danone and China’s Wahaha: A Lecture on How (Not) to Make Allies Enemies, it matters little if Danone is legally in the right. They need to show internal and external stakeholders that Zongs’s actions were the ones in the wrong… and that it is not Danone stealing Wahaha… but Zong stealing from Wahaha.

Legally, Danone may (the case has yet to close) have the goods on Zong, but all the legal stuff aside… Wahaha’s employees are protesting.. and that means that they support Zong, and for anyone who read Mr. China, you know how bad things can get when the employees of a beverage company revolt against foreign management.

Of course, we have all known that joint ventures are tricky. In one conversation I had with a big 4 partner, he estimated that 75% of joint ventures they consulted on failed…

An unnamed source in an MSNBC article is quoted as saying

“From Danone’s point of view, it had become impossible to work with Zong, but it might also be impossible to run the company without him.”

And this goes straight to the heart of the problem. joint ventures are not passive investments, but require active participation by both sides…. and that is an issue that needs a whole series of posts to cover

Don’t change that dial. It is only going to get more interesting…

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