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 Wal-Mart will reimburse customers who bought the tainted "Five
Spice" donkey meat and is helping local food and industry agencies
in eastern Shandong province investigate its Chinese supplier, it
said late on Wednesday in official posts on China's Twitter-like
Weibo. The Shandong Food and Drug Administration earlier said the
product contained fox meat.
The scandal could dent Wal-Mart's reputation for quality in China's
$1 trillion food and grocery market where it plans to open 110 new
stores in the next few years. China is the largest grocery market in
the world and is set to grow to $1.5 trillion by 2016, according to
the Institute of Grocery Distribution.
"This is another hit on Wal-Mart's brand, meaning wealthy shoppers
will start to lose the trust they had before," said Shaun Rein,
Shanghai-based managing director of China Market Research (CMR)
Group. CMR estimates Wal-Mart's market share fell from 7.5 percent
to 5.2 percent over the last three years.
Donkey meat is a popular snack in some areas of China, although it
only accounts for a tiny fraction of overall meat consumption. In
2011 China slaughtered 2.4 million donkeys, according to country's
livestock industry yearbook.
TRACK RECORD
Wal-Mart, French grocer Carrefour SA, McDonald's Corp and KFC-parent
Yum Brands Inc among others, have come under fire before in China
over food safety issues, a sensitive topic in a country riddled with
scares from a fatal tainted milk scandal to recycled "gutter oil"
used for cooking.
Wal-Mart said it had set up an investigation team to look into the
incident, would strengthen food safety rules and take legal action
against the product supplier. It added the person in charge at the
supplier factory had already been detained.
"We are deeply sorry for this whole affair," said Wal-Mart's China
president and CEO, Greg Foran. "It is a deep lesson (for us) that we
need to continue to increase investment in supplier management."
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The U.S. retailer has had a troubled past in China. In 2011, China
fined Wal-Mart, along with Carrefour, a combined 9.5 million yuan
($1.57 million) for manipulating product prices. Wal-Mart was also
fined that year in China for selling duck meat past its expiry date.
Food safety scandals can have a significant impact in China. Yum has
struggled to recover sales in China more than a year after a chicken
supplier to KFC in the country was found to have used excess levels
of antibiotics. Analysts, though, said the impact of the current
scare would be far more subdued.
Wal-Mart, which operates more than 400 facilities in China, competes
with market leaders Sun Art Retail Group Ltd and China Resources
Enterprise Ltd, which in August teamed up with British retailer
Tesco Plc.
Consumers on popular microblogging site Sina Weibo were at a loss
whether to criticize Wal-Mart or support it. Online sentiment can
spread quickly in China where there is a high proportion of social
media users.
"Isn't fox meat more expensive than donkey meat anyway?" asked one
bemused user.
($1 = 6.0539 Chinese yuan)
(Additional reporting by Shanghai
newsroom; editing by Matt Driskill)
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