The Final Nail in Danone’s Coffin: Faber Quits

Thursday, January 17, 2008 6:24
Posted in category Invest in China, The Big Picture
Comments Off on The Final Nail in Danone’s Coffin: Faber Quits

Nearly a month to the day since the Hangzhou ruling came in, and we have what appears to be the end of an era at Danone. Emmanuel Faber, the Asia Region head for Danone, has resigned his post at the Danone-Wahaha venture.

According to the article:

“A huge loss has been caused for Danone because Wahaha still controls the distribution of its products. Settling the disputes quickly will help to maximize Danone’s interests,” Tang added.

For those of you have been following this from day one, you will know that I took a “They should have seen this coming” atttitude towards the entire affair. It was one of the best stories around, and even moreso than the product scandals, I was a bit beside myself with some of the reporters who used this as one of their examples when showing how the poor innocent multinationals were being raped by their Chinese partners.

To be perfectly frank, Danone played a game that they were neither ready for, nor played well. Where common sense should have prevailed (getting the trademark paperwork moved into the JV), it didn’t. Instead, they took a hands of approach with a successful entrepreneur and lost.

Where many people see this as a warning, I see this as a perfect lesson of just what happens when people/ firms pull the wool over their eyes. Like Mattel, Danone has lost potentially hundreds of millions of USD because they failed to respect the fact that they were in China and the rules are different here.

Once they figured out what Zong was up to, and they stated negotiating with him, they really should have calculated their odds and planned accordingly. Zong was betting on Hangzhou all along, and he knew he would win. He knew he would win because he knew that it was Danone who was responsible for ensuring the trademark was transfered and they didn’t.

Unfortunately for Danone, the losses have piled up.

There are losses from the Wahaha investment, and there are losses from other investment.

Perhaps they should have entered China 10 years ago through a WOFE

Perhaps they should have offered Zong another 10% in the early stages in the settlement last year

Perhaps they should not have outed Zong as a corrupt businessman


In the end, Danone’s experience has been a hard one, and while there are a lot of should, could, and would… the fact is that there were too many didn’ts.

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