The trial’s proceedings concluded at the end of December and featured Shanghai Husi Foods and Hebei Husi Food, which, along with 10 employees, had been charged by prosecutors in September.
A statement posted by the Shanghai Municipal People’s Procuratorate on 30 September had stated the defendants were to be charged with producing and selling fake or substandard products. The Shanghai municipal bureau of public security (the police), in conjunction with the Shanghai Food & Drug Administration (FDA) were pursuing a case which “involved criminal detention according to the law”, said the statement. The FDA is China’s primary food safety watchdog.
The investigation was sparked when Shanghai Dragon Television, a Chinese news station, aired a report alleging Husi workers were repackaging and selling expired chicken and beef in July 2014. The China- and Japan-based operations of fast-food chains, such as Yum! Brands (which owns KFC) and McDonald’s, halted supplies ordered from OSI.
In a statement on its Chinese website following the TV report, OSI apologised to customers, but pledged this was an “isolated” incident. OSI boss Sheldon Lavin apologised for the firms’ Chinese subsidiary and said two plants would be shut down. The trial came at a bad time – with food safety having become a Chinese government priority. Harsh penalties are expected for anyone convicted of offences under a new food safety law enacted last year (2005).
OSI’s business in China has tracked the rise of western fast food chains and dietary habits in China. A lack of consistent, large-volume domestic meat supplies has been a key issue in the expansion of foreign-owned fast food chains such as KFC in China, but has also been central to the more recent spread of convenience retailers such as US-based 7-Eleven, which do a large take-out lunch service.
Indeed, it is a mark of how underdeveloped China’s supply chains have been that Husi/OSI also supplied leading domestic brand Dicos, which serves a KFC-style menu. Aside from KFC, McDonald’s customers in China have included fast-growing chains such as the American Starbucks Corporation, Japan-based Yoshinoya and even the catering wing of IKEA, all of which are wildly popular in China.
OSI entered China in 1991, opening a meat processing plant in Beijing and signed up with McDonald’s China as a supplier the following year. Processing plants were opened in Henan and Shanghai in 1996 and 1998, with the firm having eight distribution and processing facilities, including in Hebei province, Guangdong, Henan and Shanghai.
The firm also has a trading office in Hong Kong and a distribution hub in the far-flung southwestern city of Kunming, handling 3,000 tons per year.
Yum! Has been affected by the fallout from the Shanghai case, with Chinese consumers turning away from KFC, the market leader, which posted signs in its restaurants assuring customers it no longer used Husi products. That said, Yum! Brands has reported that sales at its established restaurants in China rose an estimated 1% in December, reversing the decline in November.