Shanghai Husi Food Co.’s Shoddy Food Supply Affects Yum! Brands Inc. (YUM:US) and McDonald’s Corp. (MCD:US)

A Chinese meat supplier, Shanghai Husi Food Co., was shut down because an investigation proved that they were selling expired meat. China government ordered spot checks to be performed on all food companies that purchased meat from this supplier. These include Yum! Brands Inc. (YUM:US) and McDonald’s Corp. (MCD:US). The China FDA is now investigating the meat supplier, checking for invoices, certificates and purchases. If any crimes by Shanghai Husi Food Co. came into light, then the case would be handed to the police and further investigations will be carried out in all food producers of China in which Aurora, the owner of Shanghai Husi, has invested. Regulators will check operations in Hebei, Henan, Shandong, Yunnan and Guangdong.

Aurora is an OSI group based in Illinois. They publicly apologized to their customers. On the very day that the Dragon TV, a local channel, reported that Shanghai Husi were selling expired chicken and beef, the authorities of the city closed down the company. The case causes people to become more concerned about the safety of food in the country. Recently, melamine was discovered in a baby formula and fox DNA was found in Donkey meat.

Both McDonald’s Corp. (MCD:US) and Yum! Brands Inc. (YUM:US) said that they have ceased purchases from Shanghai Husi and have apologized to the customers for the unavailability if some items in their menu. Similarly, Starbucks Corp.(SBUX) also had to remove one item from its menu.

Heidi Barker, a McDonald’s Corp. (MCD:US) spokeswoman, said that the meat only affected the outlets in Shanghai and some in Japan. The meat supplier was not responsible for meat in all the branches in China, it was only the supplier of meat for branches in Shanghai and some in Japan. Fortunately, in Japan only McNuggets were discontinued. She also said that the company is cooperating with the China government and FDA in the investigation and, if proved guilty, trade with Shanghai Husi will be completely stopped.

The reporters for Dragon TV claimed to have seen Shanghai Husi repackaging expired meat. FDA China asked all the companies that buy meat from Shanghai Husi to remove their items from the shelf. Starbucks Corp.(SBUX) was only affected in China, because the product that was affected was chicken apple Panini; an item that has been sold in China only.

Yum! Brands Inc. (YUM:US)’s shares decreased in New York by 4.2 percent, closing at price $74.13. McDonald’s Corp. (MCD:US)’s shares fell by 1.5% closing at $97.55. Starbucks Corp.(SBUX)’s shares reduced by 0.4%, closing at $77.61.

Both Yum! Brands Inc. (YUM:US) and McDonald’s Corp. (MCD:US) have been affected by food safety issues in China for the second time in two years. Other companies in China were also affected by sloppy food suppliers. Many companies, after suffering at the hands of food suppliers, have decided to take up their inspections by a few notches. They will personally investigate the food from suppliers before using it.