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FAST FOOD ambitions in CHINA HURT by SAFETY SCARES BREAKING NEWS 2014
Fast food ambitions in China hurt by safety scares
Already China’s biggest restaurant operator with 4,600 outlets, KFC is pursuing Chinese consumers so avidly it opens two more every day.
That dramatic growth comes with a big catch: KFC’s quality control is struggling to keep up.
The Louisville, Kentucky-based chain is reeling after a Chinese supplier was accused of selling expired beef and chicken to it, McDonald’s and possibly other restaurant chains. Just 18 months earlier, KFC’s sales plunged in China after a supplier violated rules on drug use in chickens.
Global fast food chains are rushing to expand in China but even experienced operators face costly pitfalls in a fast-changing food supply industry plagued by repeated safety scandals.
Breakneck growth has strained the ability of companies to monitor thousands of farmers and meat processors, many of them small and remote, with incentives to cut corners, according to people who follow the industry. They say regulation and government enforcement are lagging.
“We are going to see more issues like this,” said analyst Ben Cavender of the China Market Research Group.
“On the supplier side, people are not well-trained, or there is not good oversight,” he said. “On the restaurant side, they have people checking the products but they probably don’t have enough people who are spending enough time at the supplier sites.”
In the latest scandal, authorities are investigating whether Shanghai Husi Food Co., owned by OSI Group of Aurora, Illinois, repackaged and sold old beef and chicken to KFC and McDonald’s. Police detained five Husi employees but authorities have yet to confirm whether the report by a Shanghai TV station that they sold expired meat was accurate.
KFC owner Yum Brands Inc. and McDonald’s Corp. said they immediately stopped using products from Husi, but the scare is already taking a financial toll.
Yum, which also owns Pizza Hut, said sales are down and if the effect persists it might be severe enough to cut into the company’s global profit.
McDonald’s Corp., headquartered in Oak Brook, Illinois, said about 500 of its 2,000 restaurants in China were affected. Its sales could suffer for several quarters, according to a restaurant industry analyst. Some of its stores had only fish sandwiches and fries for sale this week.
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