China Food Scandal Not Only Hits McDonald’s – KFC Dragged Down
Food safety scandal hits Yum Group
The food safety scandal that has hit fast-food chains in China and Japan has dented third-quarter sales at KFC China, prompting the KFC and Pizza Hut owner to cut its full-year profit forecast.
Yum! Brands, the parent company of KFC, Taco Bell, and Pizza Hut, reported third quarter earnings on Tuesday afternoon and missed consensus analyst estimates. Yum! posted earnings per share of $0.87, narrowly lower than the $0.88 consensus, and revenue of $3.35 billion, also below the $3.45 billion estimate.
“China sales are on the path to recovery and we expect to develop at least 700 new restaurants in China this year, which we’re confident will ultimately deliver high returns as we further capitalize on the world’s fastest growing consuming class,” Chairman and CEO David C. Novak said in a statement.
Kentucky-based Yum said that publicity over the supplier, a subsidiary of US-based OSI, had hit sales at its KFC and Pizza Hut restaurants in China – in spite of the fact that OSI was not a big supplier to these brands.
KFC and McDonald’s, both of which used the US-owned meat processor to supply their Shanghai outlets, subsequently apologised to their Chinese customers. China accounted for 35 per cent of Yum’s total operating profit in 2013.
Why Food Safety Question always Happened in China?
Local officials become part of the low-quality food chain and share in the profits. Naturally, they have no interest in eliminating the problem. This is not just apparent in the food and drug sectors. The recent cases of pyramid scheme fraud in Beihai and Nanning, the sex industry in the Pearl River Delta – these sorts of problems are also tied up with the interests of local officials. Government aims and objectives are not implemented and so governance fails. Worse, with this culture already entrenched, strengthening enforcement in any one area actually gives officials more power to extract benefit – creating the opposite effect to that intended. The more invested in enforcement, the more power the officials have, and the less effective governance becomes.
Finally, there’s consumer and public oversight. China’s particular policy and legal environment cannot meet the political needs of a modern society and citizenry. Media supervision and public participation are limited, non-governmental supervisory groups cannot act, self-regulation by industry groups is underdeveloped and public law suits against food and drug firms fail to get through the courts. The food and drug industries lack the pressure of social oversight, and so the final and most direct line of defence is lost – and safety problems just get worse.
How do you personally deal with rampant food safety issues in China?
I keep an eye on both the official government reports and as much independent media as I am able to access. I am very interested for my own personal health, as well as for the sake of my friends here. Since my roommate (also American) and I started eating only imported food, our health has improved dramatically. In particular, my roommate’s constant skin allergies and rashes have died down. We eat food from China only when out with friends — which we keep to once or twice a month. Most of the time we encourage our friends to come to our home for a meal instead. Whenever we eat out, we can tell. We generally both get headaches and often have digestive problems, and my roommate invariably breaks out in a rash within 24 hours. If we are able to find a restaurant where this does NOT happen, we keep going there until it does.
*Extended Read: McDonald’s Japan Affected by Shanghai Husi Expired Meat Scandal
*The article was collected and revised by WELLGREEN PROCESS SOLUTIONS– Sanitary valves and fittings to your food safety.