Indian joint venture turns tables on Danone

By Neil Merrett

- Last updated on GMT

Related tags: Joint venture, Danone

Group Danone is experiencing further set backs to its plan to
expand its presence into Asia's booming dairy markets, as an Indian
joint venture partner turns the tables on the dairy giant,
according to press reports.

In what is proving a difficult year for the group's operations in the region, the company has been informed by the Indian government that it must gain permission from local partner the Wadia group, before it can sell its brands separately within the country. Though Asia's dairy markets are becoming increasingly sought after by global players within the industry, the resulting clash of cultures in business practices is proving far from an attractive. The government referred to Press Note 1, legislation that requires foreign companies that work with an Indian group in a joint venture. Such foreign companies must get permission before operating independently, according to the Business Standard. The decision comes on top of a number of disagreements between the two parties over Danone's investment in local nutraceuticals company, Avesthagen, and some royalty payments relating to other ventures. These difficulties in India have been further compounded by a bitter fall out with Chinese joint venture partner Wahaha, with which the company is currently locked into a court battle over alleged breaches of contract. Earlier this year, Wahaha criticised its partnership with Danone, which prevents the company from manufacturing goods that compete directly with products released through its joint ventures with Danone. As tensions between the two escalated towards legal action, a Wahaha spokesperson last week derided the company as "despicable" for how it had handled the situation. Shortly afterwards, Wahaha chairman Zong Qing Hou announced his retirement from the joint venture, leading to the instatement of Danone's Emmanuel Faber as interim chief of the operations. It remains uncertain as to how this will yet affect the future of Wahaha. For all these recent problems, the importance of Asia to Danone's global operations is unquestioned. A Danone spokesperson recently told DairyReporter.com that emerging markets like China were vital to the group's future success. "Our sales in emerging countries represent more than 30 per cent of our total sales,"​ she added. However, sales growth in the region was down to 8.4 per cent from 20.6 per cent last year, according to the company's first quarter results. China alone, despite the Wahaha controversy, was still a strong market for the group, with high single digit sales growth.

Related topics: Markets, Danone, Emerging Markets

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