Monday, December 17, 2007

Danone's China dispute continues

The row between China's largest drinks maker, Wahaha, and Danone has grown, with Wahaha's trade union saying it is suing the French firm.

A lawsuit has been filed in Weifang, a city in eastern China's Shandong province, seeking 10m yuan ($1.4m; £0.7m) in damages.

Danone has claimed Wahaha has been illegally selling copies of its drinks, contrary to their joint venture terms.

Last week, Danone offered to suspend lawsuits against Wahaha.

Danone, which holds a 51% stake in the joint ventures, had filed a lawsuit in the US against Wahaha, accusing its partner of breach of contract by using the Wahaha brand on items sold outside of their joint venture.

'Distorting facts'

The Wahaha trade union suit now accuses Danone of holding shares in companies that compete against the two big companies' 39 joint ventures.

It also claims Danone has hurt Wahaha's reputation by "distorting facts" through the media.

Meanwhile Danone is protesting against an arbitration ruling in Hangzhou, where Wahaha is based, giving the Chinese side the right to use the Wahaha brand name outside the 39 joint ventures agreed by the two firms. The French firm agreed to set up a joint venture business with Wahaha in 1996.

Under the terms of this deal, Wahaha is prohibited from making products that compete with Danone's range.

Disputed products

This year Danone agreed to invest a further 4bn yuan (£262m; $519m) in the deal, in return for control over several Wahaha subsidiaries and the right to sell foodstuffs under the Wahaha brand.

It is these subsidiaries that make the disputed products.

Wahaha was founded in 1987, selling milk products from a school store.

The deal with Danone enabled Wahaha to invest in advanced production facilities, doubling its output between 1996 and 1997.

With its headquarters in Hangzhou in Eastern China, Wahaha has 70 subsidiaries spread across 40 manufacturing sites.

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