Walmart Recalls Tainted Donkey Meat in China

Walmart
Walmart (Wal-Mart Stores, Inc) has recalled tainted donkey meat in China as DNA reports are showing traces of fox meat. Walmart announced that it is recalling donkey meat, a favorite at some Walmart meat counters in China, due to tests revealing trace amounts of unlabeled fox meat.

Donkey meat is a favorite snack in the Chinese diet. A reported 2.4 million donkeys were slaughtered in 2011 to satisfy the Chinese palate for the donkey meat cuisine.

The Shandong Food and Drug Administration reported that fox meat was identified in the donkey meat and it was working with local food industry agencies in eastern Shandong to investigate the Chinese supplier of the donkey meat. Customers of Chinese Walmart stores are being reimbursed for their purchases of the recalled tainted ‘Five Spice’ donkey meat. Walmart is also launching an investigation team to investigate the reported tainted meat.

Greg Foran, chief executive of Walmart China Operations, expressed his regrets and announced that it was a ‘deep’ lesson to learn and that continued investment was needed in supplier management and food safety. Foran also announced that Walmart would take legal action against the food supplier in the near future.

However, according to Shaun Rein, managing director of the Shanghai-based China Market Research Group, the damage may already be done. Walmart has seen its market share dip from 7.5 percent to 5.2 percent over the past few years as other food safety issues have mounted against the U.S. company. In 2011, Walmart was fined $1.57 million for price manipulation and was fined again in the same year for selling duck paste that was out of expiration. Raun stated that the wealthier Chinese consumer was losing confidence in Walmart over such issues.

While Walmart works through the tainted donkey meat issue in China it will try to re-group and regain its reputation in the $1 trillion food and grocery market in China. According to the Institute of Grocery Distribution the Chinese grocery market is on pace to reach $1.5 trillion within 2 years. This is a massive market that Walmart wants to have in its operation portfolio.

Walmart has announced that it plans to add another 110 new stores to its current collection of 400 existing stores in China in the near future.

Walmart is moving into a market that has been dominated by large hypermarket retailers in China. Notable competition includes Sun Art Retail Group Ltd who reports a 13.6 percent retail market share of the Chinese market and filed double-digit gross profits for 2013. Walmart also must contend with competitor China Resources Enterprise Ltd who also holds market share and is looking at a merger in the future.

Walmart looks to distance themselves from other U.S. retailers who are operating in China and also under close food safety scrutiny. Both KFC and McDonalds have recently come under fire for food safety violations that have included tainted milk and toxic “gutter oil” scandals. But Walmart’s recall of tainted donkey meat in China is not moving the  retailer in the right direction. China’s population is very tuned to social media and bad news can spread quickly through the social channels which can rapidly affect a retailers’ reputation and bottom line.

By Anthony Clark

Source
Financial Post
BBC News
NBC News

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