The number of food scandals is piling up for American fast food companies in China.
McDonald's, KFC, and Pizza Hut, were forced to apologize this past Sunday to Chinese fast food-goers after a local meat supplier was caught mishandling its protein. The supplier, Shanghai-based Husi Food Co Ltd, was forced to shut down after local television station Dragon TV (link in Chinese) ran footage of the company's factory workers picking hamburger patties and meat from off the factory floor and throwing them directly into meat mixers, and using bare hands to handle poultry and beef on the assembly line. The footage also showed sewage and trash spread on the floor of the processing plant; in addition, expired meat, which was described as “stinky” by workers themselves, was either concealed by mixing it together with non-expired meat, or simply altering its expiration date.
The Dragon TV report ran nearly thirty minutes:
"If confirmed, the practices outlined in the report are completely unacceptable to McDonald's," Becca Hary, Director of Global Media Relations for McDonald's said in an interview. "We are no longer serving product from the facility. This matter is being thoroughly investigated and we are cooperating fully with the authorities."
All three American fast food companies have released statements saying that they are no longer using any meat supplied by Husi Food Co. Ltd, which is one of the ten Chinese branches owned by U.S.-based food giant OSI Group LLC. According to the OSI China’s website, its Shanghai food factory manufactures meat and vegetable products, and is qualified to export products to Hong Kong and Japan. So far, there is no sign that the meat supply problem extends to any U.S. restaurants.
Still, the meat scandal is no small matter. Husi Foods Co. Ltd. has been supplying McDonald’s in China for 22 years and Pizza Hut for six years, according to the company’s website.
The shutdown will impact roughly a quarter of McDonald's locations in China--equal to more than 2,000 restaurants in the country--according to a company spokesperson. While McDonald's doesn't break out revenue totals for China, the country is seen as a key growth area for the company.
For Yum! Brands, which owns KFC, Taco Bell, and Pizza Hut, the impact will likely be less severe. "The factory only supplied a very small number of restaurants," Virginia Ferguson, a company spokesperson, said in an interview. At present, it will a cause temporary supply shortage of two of the company's breakfast products—its cheese pork hamburger and BBQ hamburger, at some KFC restaurants—and shortage of the stone pan Texas flavor beef at its Pizza Hut restaurants, according to a statement released by the company. "We have already transferred the materials from other suppliers urgently to tackle the supply shortage. Our deepest apologies to all consumers for the inconvenience caused during this period of time," the statement said.
Much of the damage, however, is likely to have already been done since this is just the latest in a series of fast food meat and food scandals in China that have surfaced in recent years.
In 2005, all of KFC's outlets in China were forced to stop selling its New Orleans roast chicken wings and chicken hamburgers after "Susan Red," a food dye linked to increased risks of cancer, was found in its sauce. In 2011, KFC was accused of re-using cooking oils for its fried chicken products for as many as ten days running. In 2012, employees at a McDonald’s restaurant in Beijing reportedly changed the expiration date on some dessert products, and used meat patties that had fallen on the floor. That same year, CCTV reported some chicken farms in Shandong province used antibiotics to raise chickens (paywall) and supply them for KFC and McDonald’s products. And In 2013, both McDonald’s and KFC were under fire once again, this time for using contaminated ice cubes, which, upon inspection, were found to contain twelve times as much bacteria as water from local toilets.
Collectively, the scandals have stunted otherwise strong growth in the region, particularly for KFC. The company saw its profits fall 23 percent in China last year, largely due to lingering fears over a number of poultry-related scares in the country. McDonald's, which plans to open another 300 stores in China by the end of 2014, is likely fearful of the potential for a similar fallout—especially if an aversion to American fast food companies is growing as quickly as some believe it to be.
"I think this is going to be really challenging for both these firms," Benjamin Cavender, a Shanghai-based principal at China Market Research Group, told Reuters. "I don't know that this is something an apology can fix so easily, because at this point people don't have a whole lot of trust that they have good systems in place."