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Wahaha rebuffs Danone's advances

By Neil Merrett , 10-Apr-2007

Chinese beverage group Wahaha has hit out at plans by business partner Danone to acquire the groups remaining assets.

Wahaha's chairman, Zong Qinghou openly rejected any possibility of agreeing to a further sale of its operations to Danone, which already owns a 51 per cent stake in their joint ventures, during a broadcast on Sunday for the Sina.com Web site. The news could be significant for many firms in the country working with multinational partners, as they look to assert greater control over their domestic operations. "Danone wants to buy our remaining companies that are not included in our joint ventures, and we are not consenting," said Zong. He added his particular dissatisfaction at the current terms of their five joint ventures with Danone, which he believes are unfavourable to them. As part of a deal signed between the two companies in, Zong said that the group were prohibited from releasing products in direct competition with its joint ventures with Danone. It also has to obtain permission from Danone before it can use the Wahaha brand on its products. "We consider such provisions unfair, prohibiting us from making goods that are produced by the joint ventures while imposing no restrictions on Danone itself," Zong added. Danone later replied to the Sina.com website with a letter rejecting the claims as "not being in line with the facts."


Nonetheless the company's tough stance is likely to have surprised Danone, which has acquired a number of food and drink companies in the country to increase in presence in the burgeoning market place there. The comments made by Wahaha, chart the noticeably changing climate for foreign country's looking to enter China's booming marketplace. Some Chinese authorities in particular are concerned at the current level of foreign investment in its companies, and have called for a review of practices that encourage foreign investment. As a result, at last month's annual legislature session, some politicians suggested a review of the current policy of offering tax incentives to foreign companies.


The issue has been driven by criticism from local companies that tax breaks offers an unfair advantage to foreign companies and needs to be changed.

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