Wal-Mart Stores, Inc. (NYSE:WMT) will concentrate on food safety to bolster its profitability in China. In an interview with Reuters, Scott Price, Wal-Mart’s chief executive in Asia said that the company’s 400 stores in China would benefit if the company would drive its efforts on the issue of food safety.
Food safety scandals has haunted the Chinese food market, such as a case two years ago where McDonald’s Corporation (NYSE:MCD) and KFC Ltd (TYO:3420) was dragged into a scandal that linked the two food chains with suppliers that treated their meat products with an alarming dosage of antibiotics. A TV report in July this year have shown workers of Shanghai Husi Food Co, a supplier of McDonalds and KFC, reusing meat that already fell on the factory floor as well as mixing together fresh and expired meat. The July issue led to the decline of KFC and McDonald’s shares by 4% and 1% respectively.
In a similar note, Wal-Mart Stores, Inc. (NYSE:WMT) was fined by Chinese authorities an amount of $9.8 million for violations that included, among others, the selling of low quality products. It was even found out that donkey meat sold by Wal-Mart was actually fox meat. Wal-Mart Stores, Inc. (NYSE:WMT) appealed to Chinese authorities to also hold manufacturers responsible for the products they sell, as is the case with other countries. The issue has prompted the company to increase testing and inspections, and plans have been made about testing products for its DNA.
In the Reuters report, Price indicated that Wal-Mart Stores, Inc. (NYSE:WMT) will bolster traffic to the company’s Chinese stores by means of an aggressive investment that will focus on food quality and safety. An amount of $49 million is slated to be spent on food safety campaign, a figure that is thrice higher than previously announced. Wal-Mart is also planning to establish 110 new stores in China from 2014 to 2016.
This article has been written by Nonito Guntan.
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