A joint venture is a contractual agreement joining together two or more businesses in which each agrees to share profit, loss, and control in a specific enterprise. While a joint venture might seem similar to a partnership, there is one key difference that sets them apart. Members of a partnership have joined together to run a “business in common,” while members of a joint venture have joined together for a particular purpose or project (Ward 1). The joint venture in our case is between Hangzhou Wahaha and Danone, which was formed by the two companies to gain a competitive advantage in the food and beverage industry. The Chinese company, Hangzhou Wahaha Group, was the country’s leading beverage manufacturer at the time of the joint venture’s inception. China’s adoption of the Open Door Policy paved the way to an economic reform, in which the result was economic growth and an increase in consumer spending. This reform paved way for Zong Qinghou, who would later found the Hangzhou Wahaha Group. Group Danone, a French company, specialized in selling a variety of food and beverage products. The two companies came together in 1996 to form this joint venture partnership; however it wouldn’t be too long before a dispute would arise out of this contractual agreement.
Hangzhou Wahaha Group (“the Group”) was founded by Zong Qinghou in 1991. Zong had showed his ambition long before he founded China’s leading beverage maker, as he worked his way up at the school-run enterprise where his mother had worked, and later decided to begin a venture of his own. He set up his own business at the school, which began by selling soft drinks, stationery, and popsicles. His business would later evolve into Hangzhou Wahaha Nutrition Food Factory, where he sold a children’s nutritional supplement. Two years later, in 1991, his business strategy had proved to be quite successful. As a result of their success, Hangzhou Wahaha Nutrition Food Factory bought shares in Hangzhou Canned Food Factory, to form the collectively-owned enterprise, Hangzhou Wahaha Group. By 1994, the Group had expanded their product offerings to include a variety of drinks. They now offered milk, yoghurt drinks, juices, colas, and bottled water, and had become China’s leading beverage company as a result. The Group’s rousing success can be partly attributed to the establishment of over fifty subsidiaries across China.
Group Danone was founded in 1966 in Paris, France. Danone was originally a glass and packaging manufacturer, while also being involved in the food and beverage industry. During the early years, Danone produced fresh dairy products on a global scale, and offered a wide variety of other products, including cereals, biscuits, bottled water, and baby food. Because they lacked the resources to enter new markets that the bigger companies had, they formed a number of joint ventures with local companies in their host countries. Using this strategy, Danone proved to be successful, and expanded to over 120 countries around the world. Drawn in by the recently reformed and emerging Chinese economy, Danone began developing its business in China by building factories there. Danone also continued with their joint venture strategy by teaming up with local Chinese companies, including Hangzhou Wahaha Group.
A joint venture partnership was formed between Danone Group and Hangzhou Wahaha Group in 1996. The agreement was facilitated by Peregrine Investments Holdings, a Hong Kong-based investment bank. In forming the joint venture partnership with Hangzhou Wahaha Group, Danone formed another joint venture entity, Jinjia Investments, with the Hong-Kong based Peregrine. Originally, Danone and Peregrine owned a total of 51% in the joint ventures, and the Group owned the remaining 49%. However, following Peregrine’s collapse during the Asian Financial Crisis, Peregrine’s role in the joint venture disappeared. The Jinjia joint venture originally consisted of...
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