Walmart's fox meat scandal: What do retailers need to know?

Why are we talking about this now?

The Shandong Food and Drug Administration found the contamination in the “Five Spice” donkey meat product. Walmart said it will reimburse customers who bought the product. Walmart China chief executive Greg Foran said: “It is a deep lesson [for us] that we need to continue to increase investment in supplier management.”

What are the implications for Walmart?

The world’s largest retailer has vowed to take legal action against the supplier involved and is working with local authorities on an investigation into the supplier. Walmart is setting-up a team to investigate the incident and strengthening its food safety rules.

However, the issue is a blow to Walmart in a country where it is eyeing significant expansion and in which food safety is a sensitive issue. Bryan Roberts, Kantar Retail insights director and author of a book on Walmart, says food safety scares “can be quite damaging for a business in China”. He adds: “The government is very strict and incredibly vocal on food safety. It is fairly bruising for big chains as supply chain provenance and safety is one of the reasons customers shop there over more informal retailers.”

Have there been any similar incidents?

Yes, the Chinese issue has arisen almost exactly a year after the horse meat scandal rocked European retailers and will send a chill down the spines of grocers keen to put the incident behind them. Walmart and rival Carrefour are also still recovering from 2011’s “green pork” scandal in China in which stores closed over mislabelled products.

What does this mean for European retailers?

In the context of the horse meat scandal, Walmart’s discovery is particularly worrying. An independent report by Professor Chris Elliott for UK government last month recommended a specialist food crime unit be set up.

Roberts says the donkey meat issue is unlikely to be the last such case.

“In emerging markets it could be a recurrent issue but the UK by no means has a clean bill of health,” he says. “There were reports of fake alcohol being presented as genuine over Christmas so if criminals are determined to deceive retailers there’s very little they can do to stop deliberate fraud. ”