Danone’s strategy of pursuing high growth through joint ventures with local partners is looking increasingly foolhardy. Even as it is in the midst of vicious legal battles with its Chinese local partner, Wahaha, its relationship in India is crumbling.
Its Indian partner, Britannia Industries, controlled by the Wadia family, are understandably unhappy that Danone wants to sell its own products in the country, which would break the terms of their agreement.
According to the Wall Street Journal on June 22:
Now, Danone and the Wadias are in talks that could lead to an exit by Danone from the venture, according to people familiar with the situation. One of those people says an agreement could be reached within a month. A possibility is that Danone will pay the Wadias a fee to leave the venture.
Another Journal article, by James Areddy, outlines the hits and misses of Danone’s piggybacking strategy:
But the case is a blow to Danone’s strategy of piggybacking into new markets. Partnering with a local business promises a foreign entrant like Danone a quicker and less costly way to penetrate a market. With Wahaha, Danone claimed 23% of China’s bottled-water market last year and was the biggest beverage maker by volume overall in the country, beating out competitors like Coca-Cola Co. Rival consumer-product companies have traditionally employed the slower, more expensive go-it-alone route.
For more background and commentary on the ever deepening Danone-Wahaha case, check out China Law Blog, which is doing an excellent job of tracking the case.