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McDonald’s is losing a lot of customers in China over the expired meat scandal

People walk by a McDonald's store in downtown Shanghai July 31, 2014. A food safety scare in China is testing local consumers' loyalty to foreign fast-food brands, including McDonald's Corp and Yum Brands Inc, which owns the KFC and Pizza Hut chains. Yum said on Wednesday that the scare, triggered by a TV report earlier this month showing improper meat handling by a supplier, Shanghai Husi Food, caused "significant, negative" damage to sales at KFC and Pizza Hut restaurants over the past 10 days. "If the significant sales impact is sustained, it will have a material effect on full-year earnings per share," Yum said in a regulatory filing. REUTERS/ Carlos Barria (CHINA - Tags: BUSINESS FOOD HEALTH) - RTR40RF0
Reuters/ Carlos Barria
At least it was actually meat.
  • Kabir Chibber
By Kabir Chibber


Published This article is more than 2 years old.

That symbol of Americana, McDonald’s, has suffered a hit around the world. Global comparable monthly sales in July fell by 2.5%, the hamburger chain’s worst performance in a decade. The drop was led by Asia, Middle East, and Africa, where sales fell by a whopping 7.3%.

The reason? The expired meat scandal in China, where health authorities suspended Shanghai Husi Food for selling beef and chicken as much as one year past their expiry dates to McDonald’s and to Yum Brands, which owns KFC and Pizza Hut. An investigative report showed Shanghai Husi workers “picking up food from the floor and throwing it into processing machines and “discarded” McNuggets were were reprocessed until they passed inspection. The US-based OSI Group owns Shanghai Husi and is McDonald’s largest protein supplier. ”Results in China, Japan and certain other markets experienced a significant negative impact,”McDonald’s said Friday.  ”The affected markets represent approximately 10% of global systemwide sales.”

But the company also has a problem in the US—where sales fell 3.2% as consumers turn away from fast food and the company faces bad publicity over the low wages of many of its workers. The National Labor Relations Board has ruled that the company is liable for conduct at its franchise stores as well—which is how the vast majority of its 14,000 stores are operated.

McDonald’s hopes to have chicken and beef back in all its Chinese stores very soon, but undoing the lasting damage to its image may take a while longer. The chain said the Chinese expired meat scandal put its sales forecasts for the whole company this year at risk. “Going forward, McDonald’s is undertaking recovery strategies to restore customers’ trust and confidence,” it said. Until then, there’s always the filet-o-fish.


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