Teys Bros

China - US companies taking shortcuts

25 Jan 2013

Supply chain failures first in China and now in Canada might have Yum! Brands CEO David Novak singing that old Frank Sinatra song about “riding high in April, shot down in May.’”


Novak, also a motivational speaker and author, was coming off a year that saw a book published and not long after being named as the New York Stock Exchange’s CEO of the year. In less than a month, supply chain failures in China and Canada have left Novak with a lot more to worry about than just being uplifting.


Two of Yum’s restaurant chains, KFC and Taco Bell, are at the center of food safety crises. The first involves chicken suppliers in China that have left its KFC outlets very much on the defensive. And the second involves, California-grown lettuce supplied to both KFC and Taco Bell outlets in Canada.


In China, which represents 44 percent of Yum’s annual revenue, the issue is whether KFC’s are getting their raw chicken from suppliers that have used higher than permitted levels of antibiotics. Juiced chicken suppliers have been the subject of both media and official inquiries in China, and KFC came in for heavy criticism.


Yum! Brands, through Sam Su, its chairman and CEO for China, last week apologized for not reacting fast enough and its poor internal communications.


“Our food is perfectly safe to eat, and KFC in China has very strict food handling and quality control standards that meet or exceed all government regulations,” Su said. He said suppliers are required to follow those standards to ensure food safety.  KFC has 5,100 outlets in China.


“We regularly audit our suppliers, and if we ever find a supplier in non-compliance, we take immediate corrective action to resolve the issue, including terminating the relationship if that is warranted,” he said. “We will continue to cooperate with the Shanghai FDA as they conclude their review and hope to use their findings to strengthen our industry-leading standards and processes to prevent isolated supplier issues from repeating in the future.”


Yum! Brands, traded on the New York Stock Exchange, has now disclosed that negative publicity in China over the poultry issue late in 2012 is now likely to mean same store sales in the country are going to be off by 6 percent.


It has dropped the suppliers, but was apparently slow in getting the word of to its customers in China.


Just as it was charting its recovery in China, however, Yum! Brands was hit with another supply problem in Canada as California-grown lettuce served at its Taco Bell and KFC units was found contaminated with E. coli O157:H7, causing at least 26 illnesses.

Yum! Brands reacted quicker in Canada. Sabir Sami, CEO for Yum! Restaurants Canada, said the company is “obviously concerned “ Sami said all the affected lettuce has been removed from its restaurants in Canada, adding that its “food is perfectly safe to eat.”


FreshPoint in Toronto, a subsidiary of Houston-based food distribution giant Sysco, supplied the Taco Bell and KFC restaurants in Nova Scotia, New Brunswick, and Ontario with the contaminated lettuce. It has officially recalled the lettuce, although its unlikely to it remains in the food chain, according to health officials.


The onset of illness dates for most of Canada’s E. coli O157:H7 cases fell between Dec. 23 and 26. The victims ranged in age of two to 83 years of age. While there have not been any deaths  attributed to the outbreak...





Source: Argentine Beef Packers S.A.

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