Danone and Wahaha: China-Style Divorce (A)

This is the first of a two-case series (207-025 and 207-026). In 1996, Hangzhou Wahaha Group, the largest food and beverage enterprise in China, signed an agreement with Danone Group to establish five joint venture companies. On 3 April 2007, Mr Zong Qinghou, the Founder and Chairman of Wahaha Group, disclosed to the media that Danone threatened to acquire non-joint venture subsidiaries of Wahaha Group at a price of RMB4 billion, which had assets of RMB5.6 billion and a profit of RMB1.04 billion in 2006. Mr Zong was irritated by Danone''s threat. Instead of going to the court, Mr Zong resorted to the media and tried to turn a commercial dispute into a public issue, thus playing the nationalism card. The case is tailored for illustrating the complexity of establishing a joint venture as well as the challenging institutional environment in China.