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McDonald's to boost China supplier audits after food safety scandal

SHANGHAI (Reuters) - McDonald's Corp will increase the number of audits it conducts of suppliers in China, the firm said on Tuesday, after a food scandal in July dented China sales at the U.S. fast food chain and rival Yum Brands Inc.

In a statement emailed to Reuters on Tuesday, the restaurant chain said half of the audits would be done unannounced and would be carried out by third party auditors and internal teams.

Industry insiders had told Reuters that suppliers in China often knew about audits in advance.

McDonald's will push for more video monitoring at its Chinese suppliers and send more quality control specialists to all meat production facilities, it added.

The firm has also created a new role to oversee food safety governance in China and will launch a hotline later this year for whistleblowers to report food safety issues.

Last week, Chinese police arrested six staff from McDonald's supplier OSI Group Inc [OSIGP.UL] following allegations in July that workers at its Shanghai Husi plant used expired meat and doctored food production dates.

McDonald's has suspended supply from all Husi plants in China and is reviewing its relationship with parent OSI pending an investigation by Chinese regulators.

The OSI scandal dragged in KFC-parent Yum, coffee chain Starbucks Corp and Burger King Worldwide Inc among others. It also spread to Hong Kong and Japan.

China is McDonald's third largest market by the number of outlets and the number one market for KFC-parent Yum. McDonald's currently has over 2,000 restaurants in mainland China.

However, China's $1 trillion food processing industry struggles with fragmented suppliers and a lack of traceability, meaning auditors and food chains often remain one step behind in keeping supply chains in check.

(Reporting by Adam Jourdan; Editing by Miral Fahmy)

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