SHANGHAI: Falling sales are the latest headache for French food and beverage giant Groupe Danone SA in its dispute with joint venture partner Wahaha.

Wahaha's sales staff and distributors across the country have been opposing Danone's acquisition bid and supporting the Chinese firm's leader Zong Qinghou.

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Distribution staff in Beijing, Shanghai and a number of provinces are remaining loyal to Zong, the former chairman of 39 joint ventures between Wahaha and Danone, threatening to stop selling products made by the French company.

They have also refused to accept Emmanuel Faber, the French company's Asia-Pacific region president, as the new chairman.

A two-day emergency board meeting between Danone and new directors appointed by Wahaha after the resignation of 62-year-old Zong ended in discord on Wednesday.

"The coverage of the dispute has dampened sellers' confidence," said Ye Xin, general manager of Wahaha Group's sales company in Northeast China's Jilin Province. "Overall sales in June are not positive, and some clients have reported falling sales compared with last year."

In Jilin, profit grew 5 percent this month on 2006, compared with a combined 30.5 percent surge in the first five months for the joint ventures, according to the sales company. Shan Qining, Wahaha Group's spokesman, said production lines at some joint ventures had been halted.

In other provinces, including Heilongjiang, Hunan, Sichuan and Hainan, thousands of joint venture distribution staff have made statements saying they will quit their jobs if Zong is no longer chairman.

In South China's Guangdong Province it is feared the takeover will affect Wahaha's market share, which is currently growing at over 100 percent a year.

Faber, appointed by Danone as acting chairman of the joint ventures, said in mid-June that the business would not be affected in the short term.

But he conceded: "Employees' and distributors' morale and unity are undermined by attempts to stir up emotions as the peak season for sales has arrived."

Meanwhile, a dozen Chinese executives of the joint ventures have threatened to break away from Danone to form a separate company.

Earlier this month, employees from a Shanghai-based Wahaha sales company took to the streets to protest Danone's acquisition bid for Wahaha's 20 businesses beyond their joint ventures for a reported 4 billion yuan.

(China Daily 06/23/2007 page10) 

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