Danone Case Study

When and how did Danone expand into the Chinese market?
There are several products primarily sell by Danone are yogurt, biscuits, and beverages in China. Danone emerged Chinese market at the end of 1980s. Since then, Danone has invested heavily in China, included building factories and expanding production. Danone purchased shares of numerous market and industry leaders as well. Danone has a network of partnership with few of local market leader in China, including Wahaha Group which is 51%, Robust Group which is 98%, Shanghai Maling Aquarius which is 50%, Shenzhen Yili Mineral Water Company which is 54.2%, China Huiyuan Group which is 22.18%, Mengniu which is 50% and Bright Dairy which is 20.01%. There is 70 factories throughout China, including
Danone purchased Robust, the then-second biggest company in the Chinese beverage industry in 2000. In 1999, sales of Robust had reached RMB2 billion. After the purchase, Danone dismissed the original management and straightforward managed Robust. Due to its management unfamiliar with the Chinese beverage market that lead them in experiencing a RMB 150 million in lost in year 2005 and year 2006. Robust struggled at that time because its tea and dairy products almost disappeared from the market. The second point is lack of management control has lead Danone to sell its entire almost 20% of Bright Diary in 2007. Danone pulled out of a new dairy venture with Mengniu, a top mainland milk producer in 2007. The third point is a violation of JV Trademark. The Wahaha joint venture (JV) was formed in February 1996. This structure led to immediate misunderstandings between the participants due to different cultures. From Wahaha Group’s point of view, with the division of ownership at 49% Wahaha Group, 25.5% Danone and 25.5% Baifu, Wahaha was the majority stockholder in the JV. Danone bought out the interest of Baifu in Jinjia, becoming 100% owner of Jinjia and also the 51% owner of the JV in 1998. This made Danone legal control over the JV because of its right to elect the board of directors. Therefore, the Wahaha Group and Zong realized two things. First is they had given complete control over their trademark to the JV from the beginning and second is a foreign company was now in control of the JV. From a legal point of view, this result was implied by the structure of the JV from the very beginning but it is distinct from public statements that the Wahaha Group did not infer the implications when they entered into the venture. The Danone “takeover” in 1998, thus produced obvious resentment on the part of Wahaha Group and Zong. They feel that Danone misled them from the very