McDonald's and KFC Confront Yet Another Food Safety Scare in China

Supplier Accused of Selling Meat Past Its Expiration Date

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A shot from a KFC ad in China.
A shot from a KFC ad in China.

KFC parent Yum Brands and McDonald's said they have stopped using meat from one of their suppliers in China as they tried to contain the country's latest food safety scare, this one sparked by a jarring TV news investigation.

The investigation, which aired on Sunday on Shanghai's Dragon TV, used footage shot by an undercover team to accuse the Shanghai Husi Food Co. of blending expired meat with fresh meat. The blurry footage also appeared to show workers scooping gobs of meat off the floor and putting it back into the supply.

Authorities shut down operations at the supplier and opened an investigation, the official Xinhua news agency said.

Yum, which also owns Pizza Hut, and McDonald's quickly posted statements online Sunday via the Weibo microblogging platform, saying they had stopped selling meat from that supplier, which is owned by Illinois-based OSI Group, and announcing they would begin their own probes.

KFC is by far the biggest fast food brand in China, with more than 4,600 restaurants in the country, compared to about 2,000 for No. 2 player McDonald's.

Shanghai Husi Food did not answer phone calls Monday, but OSI Group issued a statement saying company management was "appalled by the report," that it was cooperating with authorities and was also carrying out an internal inquiry, with results to be shared with the public. Management believes the situation was an "isolated event" but also takes full responsibility, the statement said.

McDonald's and KFC faced another supplier-related uproar in late 2012, when Shanghai food authorities said they found high levels of antibiotics in chicken from a supplier that had provided meat to the chains. That scandal, coupled with fears over avian flu, proved particularly tough for KFC to overcome.

KFC has lately been re-connecting with consumers by revamping its menu, renovating stores and rolling out free Wi-Fi.

Crisis management
The new scare became one of Monday's top trending topics on Weibo, with many users reacting angrily to the report. One user circulated an image of KFC mascot Colonel Sanders brandishing a cleaver and wearing a blood-soaked smock. Another complained: "Foreigners sell their worst stuff to China and keep the best for themselves."

Chinese consumers have had to contend with countless scares over the quality of their food, ranging from a 2008 scandal over deadly baby formula to another over cooking oil that was scooped from gutters and reused.

This year, Walmart said it would carry out DNA tests on meat it sells. That was after it recalled a donkey meat product from one supplier; authorities said the meat also contained fox DNA.

Brands vs. suppliers
Consumers expect products from Western brands to be beyond reproach, because their marketing often touts their high quality -- and because they cost more. Yet the brands are often relying on suppliers inside China, who in turn have their own suppliers.

Yifeng Mao, founder of Goldpebble Research, an independent research firm with a China focus, noted that agriculture and supply chain issues are particularly challenging in China because of the sector's "fragmented nature,"

"Both Yum and McDonald's have been working very hard on it ... and pushing consolidation for the whole sector," he said. "It needs more time down the road."

Consumers, however, are impatient. "If you ask brands to be responsible for the whole supply chain, it's very challenging, but I want to point out that consumers demand that," said Michael Chu, the Shanghai office head for Utop Communications, and former chief strategy officer for Ogilvy PR China. "The brands need to understand that and stand up to the challenge in China, in this whole environment lacking in trust."

Mr. Chu added that this scandal is unusual in its apparent scope -- Chinese media reports said many other brands besides KFC and McDonald's had used the same supplier. And this supplier, unlike in past scandals, was a unit of a large American company. OSI Group's website noted its commitments to food safety, adding "our customers trust us with their most precious asset: their good name."

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