Danone''s Chinese JV in trouble?

While Danone continues to battle with the Wadia group, its JV with its local Chinese partner the Wahaha Group too may have run into trouble. (See: After Britannia, Danone locks horns with its Chinese partner)

Danone made its entry into China in1996. The French company tied up with China''s Wahaha Group, which literally means "laughing baby".

The Chinese baby went on to take on global giants like Coca Cola and a decade later, its 39 JVs with Danone are in troubled waters.

Danone, which owns a 51-per cent stakes in all these joint ventures, reportedly discovered that 20 companies, set up by Wahaha''s chairman, Zong Qinghou, were allegedly selling identical products like those made by the JVs. And so, Danone''s demanding a 51 per cent stake in these 20 companies.

But that''s one side of the story.

According to Chinese media reports, Zong claims that Danone is resorting to pressure tactics to acquire these companies at a cheap price. The battle has now moved to the Chinese and US courts with Danone even demanding exclusive branding rights for Wahaha.

This is Danone''s second such battle in Asia. Its Indian joint venture partner, the Wadia group has also threatened legal action against the French company using the Tiger brand. That brand is a part of Britannia, which is Danone''s Indian joint venture with the Wadia group.

But Britannia wants to launch Tiger as its own brand in international markets like Indonesia. And now, as Britannia gears up to flex its muscles in the overseas market, Danone wants to go solo in India for its dairy foray.

While Danone has sought the government''s approval for this, the government has told the French food firm that it needs a no-objection certificate from Britannia to do so and has conveyed this to the Reserve Bank. (See: Danone must abide by Press Note 1: Commerce Ministry).

So far the Wadia owned Britannia has not given Danone its consent.

Folklore has it that the age of a joint venture is around seven years. By that yardstick, Danone has survived pretty well, both in China and in India. But experts say that with controversy surrounding both these JVs, Danone''s future plans could suffer a setback.