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China 2.0

Carving Out New Standards After China's Fast Food Meat Scandal

A McDonald's in Shanghai
A McDonald's in Shanghai
Zhang Yun

BEIJING — Eight days after the Osi Group meat scandal was exposed, the chief executive of the company’s U.S. headquarters finally spoke out. But the apology and the promise of reforming company regulations are so far not convincing enough for the Chinese customers who have been traumatized by the scandal. Chinese customers, who have long been fond of fast food chains such as McDonald’s that Osi supplies, are deeply disappointed by the foreign brands.

After a Shanghai TV reporter went undercover, Chinese media reported last month that workers for Shanghai Husi, the Osi division involved in the scandal, used expired meat mixed with fresher cuts and then proceeded to lie to McDonald’s inspectors about it.

Osi has an annual income of more than $6 billion, and it has made the Forbes list of largest private companies for several consecutive years. But though it has branches all over the world, its management standards in China — its biggest market — are substandard relative to its operations in other parts of the world.

This is true in several major areas. First, in terms of sustainable development, implementation of standard practices is less strict in China than in Europe and in the United States.

Second, in terms of social and economic responsibility, China is excluded from all international standards. For example, food in the United States is subject to X-ray inspections to identify foreign objects. And in Spain, all employees are asked to take part in company safety projects, which train them in how to deal with workplace accidents and emergencies. Unfortunately, neither of these practices are in place in China.

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At a McDonald's in Shanghai — Photo: akoposimark

Finally, when it comes to company management, Osi operates differently than others of similar size, which have traditional hierarchies of responsibility. Instead, Osi has adopted a “family-like” management operation in China, which the company regards as more efficient. But this decentralized system isolates its Chinese operations from common norms.

It is true that the level of Chinese food regulation is less intense than the international standard. But as a multinational company with what was until now a good international reputation, applying a double standard of quality is definitely unwise and a violation of business ethics.

The arrogance of the company’s executive, who said during a recent press conference that the company had no knowledge about food safety violations over the past two years, makes Chinese customers even angrier.

Osi Group is working to mitigate the damage by announcing a series of improvements. Company CEO Sheldon Lavin said during the press conference that over the next three years a food safety regulation center for Asia would be established in Shanghai, and that $10 million would be invested in a food safety education program. In addition, COO David G. McDonald's said that the Chinese branch would no longer be independent from the company’s international management.

As the old saying goes, better late than never.

It’s clear that the era of “easy money” is over in China. Food safety awareness among Chinese people is growing along with the country’s GDP. The Chinese don’t want to be considered second-class citizens, and companies who lose the respect and trust of their customers won’t survive.

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