Question

How was the danone and wahaha joint venture formed ? What was the structure of the joint venture? (600 words minimum)

Answer 1

Formation

The Danone Wahaha joint venture partnership was essentially a restricting of Wahaha’s existing joint venture with its Korean Partner. Hyonong. Jinjia, on behalf of Ganone and Peregrine, acquired Hyonong’s entire 34.2 percent interest in the Wahaha Hyoong joint venture and the new partners agreed to increase the registered capital of the joint venture subsidiaries from US$1.33 million to US$ 29.1 million.

Ownership Structure

In February 1996 a joint venture agreement was signed between Wahaha WFC, and Jinjia. Following the completion of the capital injections, the two Chinees partners(Wahaha and WFC) held a 49 percent interest in the JVs, while Jinjia held 51 percent. The JVs together named Hangzhou Wahaha Food Company limited (WFCL) were created based on five out of then ten existing Wahaha group companies. Wahaha put the major part of its beverage business into the VJs, namely all prior knowledge, trade secrets and intellectual property associated with beverage products, as part of its capital contribution. Danone and Peregrine invested US$45 million as a first installment followed by a further US$26.2 million. Wahaha was, therefore, able to introduce advanced technology and bring world-class production lines from Germany, the US Italy, Japan, and Canada to its sites in China.

The number of VJs increased substantially after the partnership was established from five entities at formation to 39 entities. With annual sales climbing from a few hundred million renminbi to RMB18 billion in 2006. Danone claimed that according to incomplete statistics it is cumulative industrial investment in the JVs had exceeded RM B2.5 billion. The VJs products ranged from bottled water and carbonated and fruit beverages to dairy products.

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