China Food Scare Prompts Yum, McDonald's to Publish Details

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McDonald's, Yum Release Supplier Data After China Food Safety Scare
Brent Lewin/Bloomberg via Getty Images
By Brenda Goh

SHANGHAI -- Five fast food chains including McDonald's (MCD) and Yum Brands (YUM) have published details of their suppliers on their Chinese websites following a request from Shanghai authorities after a food safety scare.

Shanghai's Municipal Food and Drug Administration said Saturday it had asked the two chains, along with Burger King (BKW), Dicos and Carl's Jr., to publish the usually confidential information as part of efforts government efforts to strengthen oversight of food suppliers.

The five firms were among a range of companies that used meat from Shanghai Husi Food, a unit of U.S.-based OSI Group, which was alleged by a TV report to have improperly handled meat and used expired food. The Shanghai authority said the companies published the information on Aug. 9.

Yum's suppliers include subsidiaries of WH Group's and China Yurun Food while McDonald's milk suppliers include Beijing Sanyuan Foods and Kowloon Dairy. A Shandong meat unit in which China's state-backed Cofco owns shares supplies both Yum and Burger King, the lists showed.

Benjamin Cavender, Shanghai-based analyst at China Market Research Group, said food chains are generally reluctant to publish supplier lists as they don't want competitors to know where they source their materials.

"In this case it's probably smart for the companies to do this because they want to send a clear message that they are being transparent both to the government and to their consumers," he said.

"But in reality for the situation to truly get better there's going to have to be stricter oversight directly over the suppliers and that cannot just be coming from the brands, it also has to come as well from the government."

The food scare involving Shanghai Husi Food is testing local consumers' loyalty to foreign fast-food brands. Yum said earlier this month that the scare had caused "significant, negative" damage to sales at its KFC and Pizza Hut restaurants across the country while McDonald's on Friday said the China food scandal had put its 2014 global sales forecast at risk.

-Additional Reporting by Donny Kwok.

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China Food Scare Prompts Yum, McDonald's to Publish Details
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