* Issues at unit "absolutely inconsistent" with OSI values
* China ops to come under direct control of U.S.
* OSI to set up quality control centre; launch education
* McDonald's drops some meat items, draws on supplier
(Adds comments from OSI executives, details)
By Samuel Shen and Kazunori Takada
SHANGHAI, July 28 A leading U.S. meat supplier
said on Monday that a Chinese unit at the centre of a food
safety scandal had issues that were "absolutely inconsistent"
with the group's high standards.
"This is my company and events like these have a personal
toll ... they simply don't represent the values I stand for or
those of my company," Sheldon Lavin, the millionaire chairman,
CEO and owner of Illinois-based OSI Group LLC told a news
conference in Shanghai.
OSI said it was suspending operations at Shanghai Husi Food
and would review all its China plants in a bid to limit further
damage after losing two major customers.
KFC and Pizza Hut parent Yum Brands Inc last week
severed its ties with OSI, while the Japan and Hong Kong units
of McDonald's Corp said they were ending their
relationship with the U.S. meat processor's Chinese unit
following allegations it mixed expired meat with fresh produce.
David McDonald, OSI's president and chief operating officer,
said the group was making senior management changes in China,
and will set up a quality control centre in Shanghai to better
supervise its business. It will also bring in global experts to
survey the China operations and improve auditing, including
constant visual surveillance and extensive employee interviews.
In addition, it plans to spend 10 million yuan ($1.62
million) on a food safety education programme in Shanghai.
OSI, which ranks among the top few dozen U.S. private
companies with annual revenue of close to $6 billion, said its
China operations had a certain amount of autonomy as the group
wanted a decentralised business model that allowed decisions to
be made locally, although global standards were not meant to be
broken. McDonald said the China operations would come under the
direct control of headquarters.
Shanghai Husi Food was accused earlier this month by a TV
documentary of mixing expired meat with fresh produce and
forging production dates. Regulators in Shanghai said Husi had
forged the dates on smoked beef patties and then sold them after
they expired. Police have detained five people
as part of their investigation. There have been no reports of
any consumers falling sick.
"To date, we've found issues that are absolutely
inconsistent with our internal requirements for the highest
standards, processes and policies," McDonald told a packed news
conference at a Shanghai hotel, adding all nine OSI food
processing plants in China would be reviewed.
China is McDonald's third biggest market by outlets and
Yum's largest and is a big growth opportunity for foreign
fast-food chains. But a series of damaging food safety scandals
in recent years risks denting those prospects as many Chinese
look to foreign restaurants for better quality.
McDonald's, which has more than 2,000 outlets in mainland
China, took more meat dishes off its menus on Monday as it
sought to fill the supply gap after OSI withdrew all Shanghai
Husi products from the market at the weekend.
At least three McDonald's outlets in Shanghai and Beijing,
visited by Reuters reporters on Monday, had stopped selling all
or most of their meat products. Outlets in cities such as
Tianjin and Wuhan were also hit, according to microblog
A spokeswoman at McDonald's in China said its beef, chicken
and pork products were affected at outlets across the country,
though the level of impact varied. In an emailed statement,
McDonald's said it had withdrawn all products from the Husi
group in China since Friday. "As a result, we are now only
offering a limited menu in our restaurants around the country."
The company said some of its China restaurants would resume
offering a full menu in early August, while others may take a
"I wanted to order chicken products today," said Tan Qiang,
23, at a McDonald's in central Shanghai. "But they only had one
type of combo and nothing else. I was disappointed not being
able to eat what I want."
(Additional reporting by Paul Carsten in BEIJING; Donny Kwok,
James Zhang and Nikki Sun in HONG KONG; Editing by Anne Marie
Roantree and Ian Geoghegan)