Yum cuts ties to owner of China meat plant after scandal

Wed Jul 23, 2014 7:09pm EDT
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By Brenda Goh and Paul Carsten

SHANGHAI/LANGFANG China (Reuters) - Yum Brands Inc severed ties with OSI Group after Shanghai police detained five people from the supplier's China meat-processing factory at the center of a food-safety scare that has ensnared several major Western brands.

Shanghai police said on Wednesday the five individuals being held included the head of Shanghai Husi Food Co Ltd as well as its quality manager.

"Yum China has decided to immediately terminate all procurement from OSI China," including Shanghai Husi, Yum said in a statement.

OSI China and its Shanghai Husi business are part of Aurora, Illinois-based OSI Group LLC, which said in a statement that local Chinese authorities have inspected all of its other facilities in China and found no issues.

Based on that statement, McDonald's Corp said it was maintaining its relationship with OSI Group.

The world's biggest hamburger chain, which has just over 2,000 restaurants in China, said it would transfer its business in affected markets to Husi's new plant in the eastern central province of Henan. And, until that process is completed, McDonald's said it would continue to buy food from Husi's factory in the northern province of Hebei.

OSI Group Chairman and Chief Executive Officer Sheldon Lavin apologized to its China customers in a statement on Wednesday and reiterated that he has teams on the ground to address the problems.

"What happened at Husi Shanghai is completely unacceptable," Lavin said. "We will bear the responsibility of these missteps, and will make sure that they never happen again."   Continued...

A security personnel stands guard in front of an OSI's food processing plants in Langfang, Hebei province, July 23, 2014. Shanghai police said on Wednesday they detained five people in an investigation into a Chinese-based supplier of foreign fast-food brands including KFC and McDonald's Corp over allegations the firm supplied out-of-date meat. REUTERS/Paul Carsten