Another food safety scare has hit Yum Brands and McDonald's in China. The news comes one day before McDonald's reports its earnings. Fred Katayama reports.
Just when KFC-parent Yum Brands seemed to be rebounding from a food scandal in China two years ago, it's smacked with another big one. And again, McDonald's is roped in. Both restaurant companies said sorry to customers after Chinese regulators shut down one of their suppliers. A local TV report revealed that workers at the local unit of U.S. supplier OSI picked meat off the factory floor and mixed fresh meat with meat whose freshness dates had expired. The two restaurant companies said they'll stop using that supplier. Food safety scares are rather common in China. Back in 2012, suppliers to KFC and McDonald's were found to have pumped up their chickens with excessive amounts of antibiotics. This year, authorities found that a Wal-Mart supplier had mixed fox meat into its donkey meat product. Investment bank CICC's analyst Mei He thinks this food scare will have a limited impact on KFC, saying, "Local management learned painful lessons from 2012's "Instant Chicken" scare and will take immediate and forceful measures to contain any adverse publicity and close the loopholes in any quality assurance procedures." The latest scare sent YUM and McDonald's shares slightly south at the market open. The news comes just one day before McDonald's reports its quarterly earnings. Profit is expected to rise just 2 percent at the struggling chain which keeps losing market share.