Home / Companies / News /  Danone may part ways with joint venture partner Rahul Narang Group

Mumbai/New Delhi: Nearly five years after Groupe Danone broke up with Britannia Industries Ltd, the French food and beverage maker is looking to part ways with its current joint venture (JV) partner, the Rahul Narang Group, two people familiar with the development said.

Danone wants full control of the beverage brands Qua and B’lue, which are manufactured and distributed by two JVs—Danone Narang Beverages Pvt. Ltd and Narang Danone Access Pvt. Ltd, said one of the two people, both of whom spoke on condition of anonymity.

But as in the case of Britannia, a part of the Wadia group, Danone is headed for a legal battle with the Narang Group.

On 9 October, Rahul Narang, promoter of the group, filed a petition in the company law board against Danone Narang Beverages under Sections 397 and 398 of the Companies Act, alleging mismanagement of funds, misconduct towards the company members and oppression by the firm in which Danone has a majority stake.

An email sent to the global communication team of Groupe Danone and phone calls made to the company remained unanswered. Repeated phone calls and messages to Rahul Narang also went unanswered.

Danone Narang Beverages manufactures and markets beverages in India such as B’lue and Qua. Danone has a minority stake in other venture, Narang Danone Access, which distributes these beverages and other international brands such as Twinings Tea, Monster energy drink and Perrier sparkling water in India.

According to the first person cited above, Danone and the Narang Group have been unsuccessfully negotiating valuations for the buyout of the brands by the French company for the last eight months.

Qua and B’lue together had sales of 100 crore in the last calendar year, said the person.

“There was a clear mismatch in expectations. It’s clear that Danone wants to come in on its own in the beverage market," said the second person.

Danone entered India through a JV with Britannia Industries but the companies ended their 13-year partnership in 2009, with the Indian partner buying out the French food giant and gaining ownership of the Tiger brand of biscuits.

“Joint ventures collapse when there is no clarity in contract and lack of trust or difference in objectives crops up between two partners," said Sunil Alagh, founder and chairman of consultancy firm SKA Advisors and a former managing director of Britannia.

To be sure, not every joint venture split is messy.

“When HeroHonda split in 2010, it was very clear which company owned which brand for the Munjal family and Japan’s Honda Motor Co.," said Alagh.

According to a July 2014 report by research firm Euromonitor International, Qua has a 0.5% market share in the ready-to-drink market in which Bisleri is the largest brand with a 22.5% market share followed by Aquafina at 10.4% for the year 2013.

“The soft drinks market in India, which includes all ready-to-drink beverages grew at 14.55% to 36,294.29 crore (in 2013) from 31,683.10 crore," said Anand Ramanathan, associate director, KPMG Advisory Services Ltd, citing the same Euromonitor report.

On Wednesday, the global market capitalization of Groupe Danone stood at €32.4 billion, according to Bloomberg data.

The French company operates globally in four business segments—dairy, bottled water, medical nutrition and infant food—and is present in all of these segments in India.

Danone Food runs the company’s dairy operations in the country and is still relatively small, selling products in Mumbai, Delhi, Bangalore, Pune and Hyderabad. It also runs an equal joint venture with Japanese probiotic products company YakultYakult Danone India Pvt Ltd, based in New Delhi.

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