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OSI Group Shrinks China Staff After Expired Meat Scandal

Last year Aurora, IL-based OSI Group broke into the top 100 of the Forbes list of the largest privately held companies. But, in the past 60 days, OSI Group, with its “World of Food Solutions” motto, has been rapidly shrinking in China.

At this point, OSI (China) might have preferred to let its Shanghai Husi Food Co. Ltd. go entirely down the drain, but the company says it cannot abandon Shanghai Husi because it must continue to assist in the ongoing official investigation into a related food safety scandal.

Nevertheless, it’s been a steep fall for the company that, this past year, had worldwide revenues totaling near $6 billion, earning it the No. 62 spot on the Forbes list.

The meat company that once supplied beef to the legendary Roy Kroc (who built McDonald’s into a national burger chain) has been struggling in China since a Dragon TV report revealed that Shanghai Husi had been selling expired meat to fast-food chains operating in Asia.

The report brought immediate cancellations from Shanghai Husi customers, including McDonald’s, Yum! Brands such as KFC and Pizza Hut, and other chains familiar in Asia.

In the two months since the TV report, OSI has gone from saying it would conduct its own internal review to having six of its Shanghai Husi staff taken into custody to layoffs of virtually everyone who worked at the targeted company.

Here’s how it came down:

July 20: Dragon TV airs an investigative report showing workers at Shanghai Husi using meat long past its expiration date and mixing inferior meat with better products. Local food safety officials shut the meat processing plant down immediately after the program aired.

July 21: OSI Group first responds to the Dragon TV report by saying, “Food safety is the cornerstone of our company.” It says it will conduct an international investigation and cooperate with Chinese food safety authorities.

OSI was quickly reeling from cancellations from customers such as McDonald’s, Burger King, Starbucks and others and an investigation that pointed to forged production dates, false use of brand labels, and employees who said they were told by management at the meat processing facility to use expired raw materials.

July 23: Owner, chairman, and chief executive Sheldon Lavin issues an apology in Chinese, English and Japanese, saying he is “appalled that it happened in the company that I own.”

“For more than 100 years, OSI has provided safe, quality food and is currently operating at the highest standards in 17 countries serving more than 40 countries around the world,” he said. “So to have this occur at this Shanghai facility violates the tenets of our company and the values we embrace and live.”

He noted that OSI (China) has a new state-of-the-art facility in Henan and that other company facilities in China were passing inspections.

July 26: All Shanghai Husi products are withdrawn from the market, and OSI brings in a new management team.

July 28: OSI President David McDonald updates the public, saying that the company want to rebuild the “trust and respect of our customers.”

August 4: Chinese authorities “detain” six OSI employees. (If someone is “detained” in China, it means they are jailed for up to 37 days. To be held longer requires an “arrest” ordered by a prosecutor. The person can then be held for up to eight months without a court appearance.)

August 6: OSI says it has a “hand-picked group of global experts” involved in its internal investigation. The official investigation is being jointly run by Shanghai’s FDA and the municipal government.

August 29: OSI confirms the six previously detained OSI staff members have been arrested.

Sept. 1: OSI announces an agreement with KanPak China to manage its Guangzhou fruit and vegetable facility. KanPak is a subsidiary of Gold State Foods based in Irvine, CA. OSI says it remains “committed to China.”

Sept. 22: OSI announces it has a “Worker Redundancy Plan” for the Shanghai Husi Facility, clearing the way for the layoff of about 340 employees. The company says it was a “difficult decision,” but the plan provides a compensation package and career development help.

The staff shrinkage experienced during the past two months still leaves OSI with a large footprint in China, where it first got started in 1991 with a food processing facility in Beijing. The Shanghai facility opened in 1998. The company has opened facilities in a dozen other locations since then.

© Food Safety News