BEIJING, July 22 -- Foreign fast-food brands in China are in hot water following allegations that a Shanghai meat processing plant was supplying out-of-date meat and mislabeling expiration dates.
The scandal took on even more prominence on Tuesday following shocking revelations that Shanghai Husi Food Co., Ltd has been conducting the malpractice for years.
Zhang Hui, manager of Husi's quality department, said during investigations that such meat had been produced under tacit approval of the company's senior managers.
Shanghai-based Dragon TV aired a news program on Sunday, claiming that Husi had supplied products tainted with reprocessed out-of-date meat to a string of fast food chains and restaurants across China.
McDonald's issued a statement over the alleged malpractice, saying it had stopped using all food materials supplied by Husi. Yum Brands Inc. also said its KFC and Pizza Hut restaurants had stopped using meat supplied by the firm.
KFC also said some of its restaurants in south China's Fujian Province will stop selling certain products.
Sandwich chain Subway said its restaurants do not use Husi meat products while fast food chain Dicos, owned by Taiwan's Ting Hsin International Group, said it has stopped selling products containing ham supplied by Husi.
Meanwhile, Swedish home furnishing retailer IKEA said Husi was a meat supplier for the retailer from September 2012 to August 2013. It no longer provides food products to IKEA.
Experts say that the expose will damage foreign fast-food brands in China, which have been implicated in a number of food safety scandals involving suppliers over the years.
TOUGH ROAD AHEAD
Western fast-food chains are popular among Chinese consumers, with China being McDonald's third-largest market by number of restaurants and Yum's top market by revenue. But these companies have been dragged into a series of scandals.
In December 2012, state-run CCTV reported that chickens used by KFC were fed chemicals and 18 types of antibiotics to make them grow faster.
"The latest scandal will certainly be negative for these fast-food chains, particularly at a time when most of these companies are trying to expand in China," said Xia Xueluan, a professor with the Department of Sociology at Peking University.
The latest case might be a blow to their images, decrease revenues and mean they lose customers, said Xia.
Food watchdogs have sharpened their teeth by launching a nationwide investigation into the meat scandal.
In Xi'an, capital of western China's Shaanxi Province, three western fast-food stores were found to have used out-of-date meat provided by Husi, which has been confiscated.
More than 700 kilograms of meat provided by Husi to chain stores was no longer being used in Inner Mongolia, while in Chengdu, 9.6 tonnes of Husi meat has been found. In Hangzhou, more than 6,000 kilograms of meat has been sealed up.
The scandal has revealed loopholes in Chinese food supervision, according to Xia. Food suppliers are siphoning money at all costs, and "they couldn't care less about customers," he said.
Xia added that poor quality supervision is to blame. "Why did KFC and McDonald's turn bad after they came to China?"
Shen Jianhua, who sits on an expert panel under Shanghai's municipal food safety office, agrees.
"The fact that regulators take action only after violations are exposed suggests that their day-to-day oversight is not effective," said Shen.
Foreign brands dogged by food safety issues in China may lose customers, particularly in the face of already intense competition from a big number of Chinese fast-food chains seeking to take more market share, said Xia.
"The case may drive many away to local fast-food competitors," Xia said.
Official statistics show that western-style diets of chips and hamburgers only take up 15 percent of the whole market, while the rest of the market share belongs to Chinese fast-food restaurants, which are still striving to expand.
Zhou Xiaozheng, a sociology professor at Renmin University of China, said western fast-food chains should beef up supervision on raw materials.
"Fast-food restaurants like KFC and McDonald's have very good word of mouth, so if they can guarantee food quality, it could help them recover from the negativity at the moment," Zhou said.