The US meat processing company at the rotten center of China’s latest food scandal

July 21, 2014
July 21, 2014

A US-owned factory in Shanghai is at the center of China’s latest food scandal: Chinese health authorities have suspended operations at Shanghai Husi Food, owned by the Illinois-based OSI Group, for reprocessing old and discarded meat to extend its use-by date. Husi was supplying meat to KFC, Pizza Hut and McDonald’s restaurants in China. Staff were captured on camera reprocessing expired and discarded meat—in one case picking up food off the floor and throwing it into processing machines.

OSI, McDonald’s largest protein supplier, is one of several American firms that have recently been buying and building plants in China in hopes of capitalizing on the country’s rising standard of living. But the allegations, made by local Chinese media Dragon Television, are a reminder of how difficult it can be to improve China’s food safety problems.

OSI has been operating in China for over 20 years and has ramped up over the last few years in hopes of becoming one of China’s largest poultry producers and food processors, with 10 factories in China as of last October. “There is no other place in the world growing as quickly as China, and we feel fortunate to be a part of it. We look at China as the number one growth effort among all of our global activities,” David McDonald, OSI’s president, said last year. An official at OSI told Reuters that the company is working with the local government to investigate the issue.

As we’ve pointed out, foreign livestock companies have realized that one of the best ways to compete in China is by providing the safest food. One reason why Shuanghui Group, China’s largest pork producer, acquired America’s Smithfield Foods last year was to gain access to more sophisticated safety safeguards for pork production. Tyson Foods has been building its own processing plants (paywall) in China, and wants to be running 90 of its own farms in China by next year to better control the supply chain. Cargill opened a $250 million poultry plant in Anhui province, and McKey Food Services—a subsidiary of of the food services giant Keystone— is a supplier in Shenzhen for China and nearby markets.

OSI has spent at least $750 million on three “vertically integrated” poultry processing centers that are designed to ensure “biosecurity, food safety and traceability throughout the supply chain.” The company’s relatively short supply chain was credited as a reason why McDonald’s was able to stay clear of Europe’s horse meat scandal last year, and industry observers say that OSI has a good reputation in the industry. But the latest scandal demonstrates that exporting effective food safety protocols is a lot more difficult than importing actual meat.

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