Danone Gets Clobbered by the Chinese

This political disaster illustrates how MNC's still get trampled in China. The Chinese see the French as the corrupt foreign business partner in this one. Normally when it comes to the French, I'm inclined to agree. However, in this case I'll give the French a reprive. This is a classic Chinese JV gotcha:

"It began in 2005, when executives at Groupe Danone, the French beverage and yogurt giant, say they noticed something peculiar in the financial figures coming from their joint venture in China with the Wahaha Group.

After a lengthy investigation, Danone officials concluded that their closest partner in China, Wahaha's longtime chairman, Zong Qinghou, was operating secret companies outside the joint venture - companies that were mimicking the joint venture and siphoning off millions of dollars."

This happens every day of the week. The foreign company finds a partner it thinks it can trust, cuts a fair deal making everyone wealthy and then gets taken to the cleaners.

"In late 2006, after Danone says it discovered the parallel companies, Zong agreed to sell a majority stake in those companies to Danone, which intended to fold them into the joint venture.

But after signing the agreement, Danone says, Zong pulled out of the deal and then began creating even more mirror companies, including his own separate sales division."

You CANNOT run a business in China as if you are a silent partner. You will lose every time.