China's Latest Meat Scandal Could Deal a Death Blow to Brands Like KFC

Posted by Abe Sauer on July 23, 2014 11:52 AM

Restaurants in China can take heart in the fact that their newly found brand nadirs are not unilateral. A new tainted chicken supply scandal has seen Burger King, Starbuck's, McDonald's, Papa John's, Subway, TGI Friday's and Pizza Hut caught in a PR disaster with Japan's Yoshinoya, 7-Eleven and even a local sacrificial lamb, China's Dico's chain.

As Apple (and McDonald's and other foreign brands) know, China's state media loves nothing more than picking national brands up by knocking foreign brands down. Indeed, there is already a whole microsite dedicated to bashing the foreign brands (and even Dico's) that have been linked to supplier Shanghai Husi Food Co. Ltd. Taking a note from America's Watergate-based nomenclature, the scandal is being called "Foul Meat-gate" ("臭肉门").

Even as Chinese food scandals go—and there are a lot to choose from—the latest one is pretty ugly. But in a situation where everyone is a loser, there is one brand that's losing worse than others.

In what has been described as a "modern, Chinese version of 'The Jungle,'" by state news agency Xinhua, the systematic selling of past-due chicken has roped in numerous brands like IKEA, who, despite having stopped using Shanghai Husi some time ago, is finding its name reported alongside brands like McDonald's and Pizza Hut, which are accused of still using the chicken in question. Chinese authorities have moved in and reportedly seized 10 tons of supply at the warehouse while across China, McDonald's and others have completely halted sales of many menu items.

But it gets worse. Shanghai Husi was one of Japan's largest chicken sources, with McDonald's Japan admitting that 20 percent of its chicken for its nuggets came from the supplier. As a result, McDonald's in Japan have suspended nugget sales.

However, the biggest loser is KFC. Once a brand case study for China expansion taught in the world's top business schools, KFC China is on its way to a smoking husk. It's only been a year since a bird flu scare in China knee-capped the brand (as well as others like chicken supplier Tyson), and that was only a year after it was revealed that KFC sourced chicken containing excessive antibiotics.

Late last year, KFC was still publicly battling the scandal with excessive marketing, including placemats featuring a diagram of the restaurant's clean supply chain, window posters with a giant fist promising to smash antibiotic use (both above), commercials with KFC China's CEO making promises. Now with a chunk of its menu suspended, KFC now faces a back-to-zero start rebuilding brand trust with a Chinese consumer base that may have a limited well of forgiveness.

When it comes to borrowing language, Watergate isn't the only term the Chinese have adopted. Nearly everyone in the nation knows the tale of "'狼来了," or "Never Cry Wolf." 

At top, an illustration from a China Daily op-ed that requires no translation.

• Connect with Abe on Twitter: @abesauer


Xandro Australia says:

Why would it be a scandal?

Surely after watching Food Inc - all the brands listed have been scandalised way back when the movie first came out. Nothing new here with the antibiotics and steroids. Oooooooh it's a scandal because it is in China?

Watch extracts of the movie again just to remind yourselfs of the scandal in the USA:

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