Wahaha's exhibition hall at its corporate headquarters in Hangzhou, Zhejiang. Photographs: Paula M. MillerThe Hangzhou Wahaha Group Co., Ltd., China's leading domestic beverage producer, didn't achieve success overnight. The company's predecessor, the Hangzhou Shangcheng District School-Run Enterprise Sales Department, funded its start-up operations in 1987 with a government loan. Zong Qinghou, the company's founder, and two retired schoolteachers initially sold milk products and popsicles out of a school store, but to benefit the students' health the group soon began producing and selling nutritional drinks. The company's success selling nutrition products in school shops led to its first big expansion: with Hangzhou government support, the company acquired a large, 30-year-old state-owned enterprise, the Hangzhou Canned Food Product Co., in 1991. The company then changed its name to the Hangzhou Wahaha Group Co. (The word "Wahaha" is meant to mimic the sound of a baby laughing and is taken from a children's folk song.)

The company's founder and two retired schoolteachers initially sold milk products and popsicles out of a school store.Wahaha's second large-scale expansion occurred in 1994 when the company merged with three insolvent companies in Fuling, Sichuan, to set up its first factory in Chongqing. Establishing a factory in Chongqing helped the company in two ways. The location provided Wahaha with a manufacturing base in western China, enabling the company to reduce distribution costs. And the merger occurred when the central government was providing coastal companies incentives to invest in the west.

In 1996, Wahaha joined with Groupe Danone SA to form five new subsidiaries, of which Danone owns 51 percent and Wahaha the remainder; Danone now owns 30 percent of the whole company. With Danone's assistance, the company was able to invest in advanced production lines and improve efficiency. Thanks to the mergers and joint ventures, Wahaha's production doubled from 1996 to 1997. 1  

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