According to Reuters and others, a major foreign-owned restaurant chain operating in China possibly used tainted meat products. An organized crime group exposed on May 2 is said to have sent falsely labeled meat products containing rat, fox and other contaminants to the Mongolian hot pot specialty restaurant chain Little Sheep which is owned by U.S.-based Yum! Brands of the U.S., operators of Kentucky Fried Chicken (KFC) and other well-known restaurant chains. This latest revelation comes to light not long after it was revealed this past January that KFC China was using chicken that had received excessive doses of growth promoting agents and antibiotics. China has become a major market for the restaurant titan, and the company is said to be at wits end as it deals with successive scandals occurring there.

Reuters, along with China’s state-run Xinhua and others reported that on the May 3, inspectors from Shanghai’s Municipal Food Safety Commission and the National Public Safety Commission searched a wholesale market in Shanghai in connection with an incident involving false labeling of sheep meat. They seized multiple packages of meat affixed with labels proclaiming “Lamb from New Zealand.” The labels, however, did not contain standard information such as dates and composition, tipping inspectors off to the fraud.

Upon further examination, inspectors discovered invoices indicating fraudulent meat product had also been sold to restaurants, including the Little Sheep chain.

Two days prior to the search, Chinese security authorities announced they had uncovered a criminal gang selling meat from small mammals, such as rats, that had been falsely labeled as lamb. The investigation, which had been ongoing for three months, resulted in the arrest of 904 individuals on suspicion of selling contaminated and mislabeled meat and the confiscation of 20,000 tons of fraudulently labeled meat products. According to Xinhua, there were instances of illegal chemicals also being mixed into the meat. The group is believed to have sold more than 160 million yen (approx. US$1.6 million) worth of tainted product since 2009.

Brands’ Images Take a Hit
Little Sheep was founded in Baoutou, Inner Mongolia, China in 1999. The restaurant’s main dish is lamb served with two types of specialty broth for cooking. Its Mongolian-style hot pot offerings proved popular, and the chain was listed on the Hong Kong stock exchange in 2008. In 2011, it was bought out for approximately 580 million U.S. dollars by Yum! Brands, which was making a major move into the Chinese market. Currently there are about 300 Little Sheep restaurants operating in China.

Yum! also operates the Kentucky Fried Chicken, Pizza Hut and Taco Bell franchises, and the Chinese market, anchored by 5,300 KFC outlets, accounts for more than half of the company’s global sales.

In January, however, it came to light that even though antibiotics in excess of standards were detected in chicken meat the company procured during 2010 and 2011, KFC China neglected to disclose the facts and report the information to authorities, continuing to illegally use the meat until 2012. This revelation, along with the outbreak of avian flu in April, has driven down customer numbers.

Local media reported that KFC sales in China for March were down 16 percent year-on-year, and that an even greater drop was expected for April.

Concerning the tainted lamb meat, Yum! is currently refraining from providing any comment. However, further damage to the company’s brands is inevitable, which could prompt it to review its global strategy of anchoring itself to the Chinese market.

Source: Sankei Express