– China Meat Scandal Spreads: McDonald’s Japan Slashes Guidance (ZeroHedge, July 29, 2014):
We warned last week that the scandal over Chinese meat supplier OSI was spreading (and Asians were increasingly shunning western fast-food restaurants) and now, as The FT reports, McDonald’s Japan has pulled its full-year profit guidance on the back of falling sales. It had previously forecast sales of $2.45bn for the year to December but warned it could not commit to new targets as it was too soon to estimate the scandal’s full impact.
As The FT reports, OSI processes the meat of 300m chickens a year in China, as well as other meats, vegetables and pre-assembled food such as sandwiches or wraps.
This is a problem for McDonalds as some of its 3,200 restaurants were forced to scratch chicken nuggets off the menu…
Fast-food chains have scrambled to redirect the supply chain after the Shanghai plant closed, and the loss of supply from all of OSI’s China plants could prove a challenge for McDonald’s, which relies on a smaller but tighter network of suppliers than does its chief rival, KFC.
“Supplies of some products to some China restaurants have been cut. We are trying hard to allocate supply from other sources and resume supply as soon as possible,” the fast-food chain said.
McDonald’s Japan, which is 50 per cent owned by the US fast food group and operates in its second biggest market by number of outlets, said that its “sales and profit expectations have been reduced” after its China-based supplier was found to be relabelling expired meat and breaching other food safety practices.
It had previously forecast sales of Y250bn ($2.45bn) for the year to December and net income of Y6bn, adding that it could not commit to new targets as it was too soon to estimate the scandal’s full impact.
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