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

3. Company Presentation  Founded in 1987  Hangzhou Wahaha Group Co. Limited owned by the government of Hangzhou's Shangcheng District.  Zong Qinghou : Chairman and managing director  In 1995, Peregrine Investments Holdings introduced Zong to Danone, and discussions about joint ventures began.  Founded in 1973 from the merger of Boussois-Souchon- Neuvesel and Gervais Danone  1979 – 1985 : acquisition of Amora, Maille, La Pie Qui Chante, Carambar…  CEO : Franck Riboud

4. 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 outlets across China

5. Suppliers  Important role of the water bottle  Kind of water  Exclusive deals with suppliers  Supplier relations

6. 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

7. What are the Key Success Factors of this business?  Being good and tasty  Being a trustmark  Product quality  Find the good chinese partner  Innovation  Culture differences and Relations

8. To what extent are these KSF mastered by the company ✔ Being good and tasty ✔ Being a trustmark ✔ Find the good chinese partner ✔ Innovation ✔ Product quality ✗ Culture differences and Relations

9. The Case : Danone versus Wahaha: Lessons for Joint Ventures in China A Happy Marriage but Painful Divorce

10. Video

11. 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 !

12. 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

13. 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

14. Lessons to be learned  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

15. 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.

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

17. Sources  Wahaha : l'empire contre attaque ! www.aujourdhuilachine.comwww.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 www.chinaeconomicreview.com/cer/2007_09/Danone_v_Wahaha. html  L'implantation de Danone sur le marché chinois http://danone-en- chine.wikeo.be/a.htmlhttp://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 www.chinabusinessreview.com/public/0409/company_profile.html

18. Q&A… Thank you !