Groupe Danone has become embroiled in a row with Chinese partner Wahaha Group, which wants to block the French dairy giant’s plans to take a majority stake in the company.
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Tensions emerged over the weekend, when Wahaha chairman Zong Qinghou claimed Danone wanted to buy a majority stake in a number of Wahaha’s businesses outside an existing joint venture between the two companies.
Danone owns a 51% stake in the venture, which was set up in 1996 and produces and sells water, yoghurt and tea and the Wadia brand.
The venture accounts for around 5% of Danone’s operating profit. However, Danone declined to confirm its level of investment in the business over the past decade.
Speaking to a Chinese website, Zong said Danone’s moves were “hostile” and claimed that the company could potentially create a Danone monopoly.
Danone responded today (11 April), confirming its intention to increase its holdings in Wahaha. “Danone intends to ensure the proper application of agreements entered into with Mr Zong,” the company said.
“In this context, discussions have been initiated pertaining to the relationship between the Danone Wahaha joint ventures and other non-integrated companies developed by Mr. Zong.”
According to Danone, Zong has established factories and a sales company that produces and markets the same products as those covered by the joint venture agreement. “To resolve this, it was agreed in December that Danone would buy a 51% stake in these businesses. However, this agreement has been reneged upon,” a spokesperson for the company told just-food.
Danone confirmed reports that it has initiated legal proceedings. “If an agreement is not reached in 30 days, litigation could well follow,” a representative of the group said.
Shares in Danone, which fell 1.6% yesterday on fears that the joint venture with Wahaha was irreparably damaged, recovered in morning trade today, increasing 0.58% to EUR122.31 (US$164.14) as just-food went to press.
