McDonald’s China plans to continue using scandal-hit meat supplier OSI Group

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McDonald’s China plans to continue using scandal-hit meat supplier OSI Group

PUBLISHED : Friday, 25 July, 2014, 2:10pm
UPDATED : Friday, 25 July, 2014, 5:38pm

Nectar Gan [email protected]

McDonald's will continue to buy meat from an OSI-owned Husi food plant in Hebei province, before it switches supplies permanently to a plant in Henan. Photo: AFP

McDonald’s China says it will carry on using scandal-hit meat supplier OSI Group on the mainland because “it is riskier to find another local supplier”.

The fast-food giant said it will be switching to another OSI-owned Husi food plant, Henan Husi, in Henan province, after Shanghai Husi Food Company was shut down by Chinese food and safety authorities for allegedly selling expired meat, the official Sina Weibo account of McDonald’s said yesterday.

In contrast, its rival, Yum Brands, the parent company of both KFC and Pizza Hut, has cut all ties with OSI, which is not its major supplier.

“For us, it is risky to find a local supplier to guarantee the quality, and the risk may even be higher [than sticking by OSI],” a source at McDonald’s told China Business News.

“Moreover, OSI has made a promise about the quality and safety [of its products].”

McDonald’s said it will continue to buy meat from a third Husi meat plant, Hebei Husi, before it eventually moves all of its supply chain to the Henan division.

Sheldon Lavin, chief executive of OSI, described the Henan plant as a “newest state-of-the-art facility”, which reflects the group’s “confidence and commitment in China”.

During an inspection of Henan Husi on Monday, organised by the local government, investigators found no food and safety problems in the production process at the plant.

Analysts said the long-term, large-scale cooperation between the fast-food company and OSI makes it difficult for McDonald’s to terminate its relationship with its long-time partner.

Reuters reported that the United States-based OSI – little known outside the close-knit food industry, has worked with McDonald’s for nearly 60 years. OSI was also among the first partners of McDonald’s when the fast-food company moved into China.

McDonald’s, which opened its first restaurant in Hong Kong in Causeway Bay in 1975, launched its first restaurant on the mainland in Shenzhen, in 1990.

OSI entered China in 1991, and began to provide meat supplies for McDonald’s in 1992.

Media reports in 2012 show that McDonald’s has five first-tier food suppliers of bread, meat, French fries and other vegetables working with it in China, including OSI and Keystone Foods, the two meat suppliers. All five suppliers are either owned or based in the US.

In 2012, OSI monopolised the supply of meat for about 400 McDonald’s branches in the northern part of China, while branches in the south were supplied mainly by Keystone, the China Business News reported.

“We don’t have suppliers everywhere, and not all suppliers can satisfy the requirements of McDonald’s,” the source at McDonald's told the China Business News.

The source said achieving an equilibrium of interests between McDonald’s and its suppliers and staff is crucial for the company. Therefore "we ... will not abandon [our] partner in a time of crisis”, the source said.

Last night McDonald’s Hong Kong suspended sales of its popular chicken nuggets after admitting that it had imported chicken and pork from the Shanghai Husi food processing plant at the centre of a rotten meat scandal.