McDonald's could break with supplier OSI

By Dow Jones newswires

The Oak Brook, Illinois, chain has in the last six weeks suspended its partnership with US-based meat supplier OSI Group Inc. and pushed alternate suppliers, such as Keystone Foods and Cargill Inc, to increase their supply capacity, a McDonald's spokeswoman said.

McDonald's partnership with OSI and other suppliers will largely depend on the results from an official Chinese government investigation into OSI's subsidiary, Shanghai Husi Food Co. , the spokeswoman said.

McDonald's Corp has replaced its largest supplier in China in the wake of an expired-meat scandal and could reconsider the relationship pending results of a government probe into the supplier's practices.

McDonald's is also one of OSI's largest customers in China, according to a Harvard Business School report.

Shanghai Husi has been under scrutiny in China, where authorities accused it of intentionally selling meat beyond its shelf life to restaurant companies after a TV station ran a report alleging the practice.

The company faced a near three-week shortage of meat products in many of its stores in the region, limiting customers' menu options and crippling the company's sales in China, Hong Kong and Japan.

The McDonald's spokeswoman said it has taken the fast-food chain time to perform full due diligence on alternative suppliers, following its late-July suspension of its relationship with OSI.

A move away from OSI would be a drastic change of position for McDonald's, which said in late July after the accusations were made that it would stand by the supplier. "We will not walk away from this issue but we are committed to resolving it," a McDonald's statement said at the time.

Sheldon Lavin, chief executive and owner of OSI, apologised to Chinese consumers late last month for the problems and said he would focus on overhauling the company's China business, focusing on quality assurance.

Read more here: Business Spectator


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