News

Yum! drops China meat supplier, McDonald’s maintains relationship

July 24, 2014

Following the latest supply chain controversy in China, in which OSI Group employees were accused of using meat that fell on the ground and selling meat that had long been expired, Yum! Brands announced it was cutting ties with the company.

However, according to Bloomberg, McDonald’s is maintaining its relationship with the supplier. Earlier this week, Chinese officials shut down OSI’s Husi Food Co. plant in Shanghai after the allegations surfaced following an investigation by local news outlet Xinhua.

McDonald’s will continue using Husi’s other operations in the country while it transitions to another facility in Henan, the story said.

During the company’s earnings call earlier this week, CEO Don Thompson said, "We are no longer serving product from the primary facility there that has the challenges and the issues.”

The company also released the following statement to Bloomberg:

“We and our suppliers have a decades-long proven track record of providing safe, quality food to our customers worldwide. Husi is taking swift action by investigating what happened and overhauling its safety procedures. We have been in direct contact with OSI’s global leaders; as an added assurance of uncompromised safety, they are sending their top food safety experts to China to provide expertise on operations.”

Analysts said they’re not surprised by the decision. According to Seeking Alpha, McDonald’s can better figure out how to solve an isolated management problem at a single plant faster than it can take on new suppliers that may have other problems.

U.S.-based OSI Group, which owns the Shanghai facility at issue, has been a long-time McDonald’s partner in China.

Yum! cut ties with the supplier after the allegations surfaced. The company is continuing to recover from another supply chain crisis last year, in which it was accused of expediting the lifecycle of chickens through the use of steroids.

Prior to severing ties, the company distanced itself from the company, saying it was not a major supplier. Its KFC and Pizza Hut brands have secured alternatives and don’t expect operational disruptions.