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Last Updated: Friday, 8 June 2007, 12:16 GMT 13:16 UK
New twist in Danone's China row
Danone products
The row with Wahaha is no laughing matter for Danone
China's largest drinks maker, Wahaha, has said it will not accept French firm Danone's choice as the new chairman of the two companies' joint venture.

Escalating a dispute between the two groups, Wahaha's comments come after its founder Zong Qinghou stood down as boss of Wahaha Joint Ventures.

Mr Zong said he was leaving the joint venture firm because Danone had harmed his reputation.

Danone claims Wahaha has been illegally selling copies of its drinks.

'Please get out'

The French firm has filed a lawsuit in the US, which Mr Zong has described as "despicable and laughable".

Danone now wants Emmanuel Faber, currently vice-chairman of Wahaha Joint Ventures and also head of Danone's Asian operations, to replace Mr Zong.

Wahaha said in a statement that it thought the joint venture company would struggle without Mr Zong.

"Do you think the joint ventures would have a bright future without Mr. Zong?" it said.

The statement added: "We're sorry, but to those two directors [from Danone]: Please get out of Wahaha!"

Official Chinese pressure

The French firm agreed to set up a joint venture business with Wahaha in 1996.

Under the terms of this deal, Wahaha is prohibited from making products that compete with Danone's range.

Danone recently agreed to invest a further four billion yuan (262m; $519m) in the deal, in return for control over several Wahaha subsidiaries and the right to sell foodstuffs under the Wahaha brand.

It is these subsidiaries that make the disputed products.

Mr Zong founded Wahaha in 1987 selling milk products from a school store.

The deal with Danone enabled Wahaha to invest in advanced production facilities, doubling its output between 1996 and 1997.

With its headquarters in Hangzhou in Eastern China, Wahaha has 70 subsidiaries spread across 40 manufacturing sites.

Danone, which is France's largest food company, has also faced other pressure from the Chinese authorities.

Last week, customs officials in Shanghai seized thousands of bottles of Evian water, owned by Danone, on the grounds that they contained harmful bacteria.




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