Round Five: Wahaha Lands a Solid Right Hook

Monday, June 18, 2007 3:34

Today, round five of the Danone vs. Wahaha saga opened up with Wahaha landing a solid right hook.

Following the last month of tit and tat pr releases, Danone’s lawsuit in us, and Zong’s resignation… Reports in wsj, shanghai daily, and other outlets are now reporting that the Hangzhou Arbitration Commission has accepted wahaha’s application for arbitration… And here is the trump card that zong has held close to his vest.

Apparently the wahaha trademark was never transfered to the Danone structure, and zong is contending that Danone does not control the trademark as per the original contract.

Now, after i picked my jaw up off the floor… I began to wonder how this could be? How could danone not have followed through on this? What person would have let this go for 10 years (the last 2 seeing internal turmoil)…

If this Is proven true, and the arbitrator’s find for wahaha… Well, needless to say we have a whole different ballgame… And danone is going to wish they paid zong the premium he was asking for.

As many including myself have said, it doesn’t matter what the outcome is. Danone’s operations in china will be impacted by this recent blowout with wahaha.. And if zong is proven to be the legal holder of the wahaha brand, the hole will deepen.

The more I read about this case, the more fascinating it is, and the more I understand Zong’s position… and how Danone misjudged the market… here are a few things that really make me sit back and wonder just what was going on at Danone’s management

  1. The JV may not have controlled the trademark
  2. Danone has known about Zong’s “infractions” for 2+ years..
  3. Zong’s extracurricular activities may account for 25% of Wahaha’s sales

While I am obviously not in the board room, it seems to me that if these are true as reported, then Danone is having internal serious issues… SERIOUS!

Again, if true, why would Danone go on for 10 years without getting the trademark moved over? There was either something in the way, or someone missed a memo… but this is HUGE.

Speculation aside, should the Hangzhou Arbitration Commission agree with Zong, there will be three immediate effects:

  1. Danone’s reputation and image in China will be severely damaged as Zong will use that to show that Danone was trying to force him into selling
  2. Danone may have no recourse in collecting any of the revenues generated by Zong’s (VERY PUBLIC) side business(s)
  3. Danone’s other partners will surely bring ou any issues that they have faced, especially if they believe that Danone’s management kept them out of markets they believed in.

Zong, at this point, waited for Danone to go all in before pulling out the fact that the trademark was not officially an asset of Danone/ Wahaha’s JV… and it is probably the reason why Danone kept their moves close to their chest… someone had to have known that Zong had this card.

For me, if it is true that the trademark was never moved into the Danone JV group, it is just another example of how companies shoot themselves in the foot. Chinese business practices in general have been called into question on so many occasions, often justified, and in this case (should Zong’s side come out on top) Danone may get really burned for trying to show Zong as a white collar criminal.

Round 4 goes to Zong… and I will venture to say that Zong will become a hero to the people if the Arbitration Commission upholds his position.

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2 Responses to “Round Five: Wahaha Lands a Solid Right Hook”

  1. China’s People University Debates Danone - Wahaha Case | All Roads Lead To China says:

    July 26th, 2007 at 1:17 am

    […] be the most interesting one is most certainly going to follow the Hangzhou arbitration (see Round Five: Wahaha Lands a Solid Right Hook) that will decide whether or not the Wahaha trademark belongs to Wahaha or the […]

  2. China’s People University Debates Danone - Wahaha Case | Top China Suppliers says:

    July 26th, 2007 at 7:31 am

    […] be the most interesting one is most certainly going to follow the Hangzhou arbitration (see Round Five: Wahaha Lands a Solid Right Hook) that will decide whether or not the Wahaha trademark belongs to Wahaha or the […]