China ordered nationwide spot checks on restaurants that sourced meat from a U.S.-owned Chinese supplier to McDonald’s Corp. (MCD) and Yum! Brands Inc. (YUM), after the unit was shut for allegedly selling expired products.
Chinese inspectors will conduct “thorough spot checks” to assess if customers of Shanghai Husi Food Co. breached their responsibilities to ensure food safety, such as checking food purchases and accompanying certificates and invoices, China Food and Drug Administration said in a statement on its website.
Authorities suspended operations at Shanghai Husi, a unit of Aurora, Illinois-based OSI Group, after the local Dragon TV channel reported on July 20 its workers repackaged and sold chicken and beef past the sell-by date. The probe may affect chains such as McDonald’s, Yum’s KFC and Pizza Hut, Papa John’s International Inc. (PZZA) and Burger King Worldwide Inc. (BKW), which said they had bought and have since removed items from the supplier.
“You’re going to see more pressure for restaurant players to take direct control of their supply chains,” said James Button, Shanghai-based director of Smithstreet, which advises companies on their China strategies. “It’s certainly going to make things difficult for brands in the short term and I would not be surprised at all if more problems are uncovered.”
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