McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM), the parent company of KFC are facing a new food safety scandal in China after a local television station in Shanghai reported that the supplier of both restaurant chain operators is using expired meat and unhygienic practices.

McDonald's

McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM) apologized to the customers after regulators in China shutdown the operations of Shanghai Husi Food, the Chinese affiliate of OSI Group LLC, a supplier of meat products to U.S. restaurant chain operators.

The Shanghai TV reporter went undercover at OSI Group’s factory in China and found that workers are picking up meat from the floor and mixing expired meat with fresh meat.

The undercover reporter asked if it is okay to use the expired meat, one of the workers replied, no problem and explained that batch of chicken breasts and chicken skin that have been expired for about 12 days will be made as chicken nuggets.

Chinese-supplier cutting corners

The worker in the report emphasized, “The rules are dead, and people are alive, that’s simple.” The statement is commonly used in China indicating that they are cutting corners.

The worker added, “We can’t let McDonald’s or Yum China know that we add (chicken skin. They won’t let us do that. Otherwise, we would lose the contracts. Who wants to do business with you if you break your promise?”

The report did not directly criticize McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM) as it showed that both companies have no knowledge about that practices of Shanghai Husi Food

The reporter showed a video footage wherein McDonald’s Corporation (NYSE:MCD) inspected the Shanghai Husi Food’s factory, and after the inspectors left, the unqualified chicken nuggets separated and stored in blue bags were put back to the production lines along with qualified batches.

McDonald’s, Yum! Brands stop meat purchases from Chinese supplier

McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM) released separate statement indicating that their decision to stop purchasing meat from OSI Group’s Chinese affiliate.

According to McDonald’s Corporation (NYSE:MCD), it has zero tolerance for any malpractices and the company abides by all laws and regulations with strict standards for itself and all suppliers.

“There is no compromise to the well-being and food safety standards that Chinese consumers have come to expect from us,” as emphasized by McDonald’s Corporation (NYSE:MCD).

Yum! Brands, Inc. (NYSE:YUM) said all of the meat products supplied by OSI Group’s Chinese affiliate will be removed from its shelves.

Commenting on the issue, Benjamin Cavender, a principal at China Market Research Group in Shanghai said, “I think this is going to be really challenging for both these firms. I don’t know that this is something an apology can fix so easily because at this point, people don’t have a whole lot of trust that they have good systems in place.”