Multinational retailers operating in China are having to take matters into their own hands as the government fails to ensure suppliers comply with the law, argues Paul French

What do you do when you operate supermarkets in a foreign country with a long history of serious food safety scares? Where food producers have persistently ignored laws and regulations and continue to introduce tainted foodstuffs into the supply chain? And where consumer outrage is directed almost exclusively at highly visible overseas retailers rather than large local food conglomerates and their protectors among corrupt politicians?

Answer: you tacitly admit the government can’t control the situation, that your suppliers will transgress, that it is you who will be punished in the media, on the internet and through consumer boycotts, and you take matters into your own hands and step up your self-protection.

This is effectively the story behind Wal-Mart’s announcement that it will increase spending on food safety in China to $48m in 2014 and 2015, a threefold increase on its originally announced war chest to fight damaging food scandals. Food scares may be old news in China – they’ve been reported heavily in the media now for 15 years – but they continue.

In response to public anger there has been a high-profile, top-down response. The China Food and Drug Administration (CFDA), modelled on the US’s FDA, has gone through numerous reorganisations and personnel changes. But even CFDA’s head, Zhang Yong, admitted recently in an interview on Chinese radio that the problem was persistent. “Violations of food safety laws are still rampant,” he said. “This is the combined result of lapses in supervision, insufficient enforcement of laws and regulations, and the lack of moral sensibility.”

Mr Zhang pretty much nailed it – rampant violations due to lack of enforcement, while “lack of moral sensibility” translates as an industry that largely does not fear any judicial censure. Cancer-causing fish, melamine-tainted milk powder, cadmium-tainted rice, clenbuterol-contaminated pork, soft drinks with high levels of plasticiser, industrial gelatin in yoghurt – the list goes on and on.

And so far the corporate victims of the continued food scares (not to mention, of course, the human cost in sickness, disability and death) have largely been those dealing direct to the wary consumer – the retailers. Wal-Mart has faced problems with mislabelled pork and, more recently, problems with its ‘Five Spice’ donkey meat (quite popular in China) that was found to contain fox meat (not so popular).

KFC, Danone, Carrefour and McDonald’s, among many other international food giants, have suffered similar problems and faced the ire of Chinese consumers and the government-controlled media.

DIY safety checks

On Wal-Mart’s menu of new measures are DNA testing on meat products, more supplier inspections and two mobile safety labs. However, Wal-Mart has more than 7,000 local suppliers in China and more than 400 stores nationwide (due to top 500 by 2016). Covering all of these suppliers and stores comprehensively will be a challenge, to say the least.

It is to be hoped that the CFDA will get behind Wal-Mart’s initiative and encourage more of the same from both other retailers and producers, but Wal-Mart China’s chief compliance officer, Paul Gallemore, says the supermarket giant’s contact with China’s food safety regulators is currently only on an “ad hoc” basis. Once again, if the top-down approach isn’t working then what hope for a bottom-up improvement from food producers?

Other leading retailers, including KFC and Carrefour, are also increasing their food safety inspection budgets. According to Matthew Crabbe, author of the recently published book Myth-Busting China’s Numbers, “the continued shameless flouting of the country’s food safety laws by manufacturers shows a regulatory gap for which Wal-Mart and others must foot the bill themselves.”

Beijing continues to pump out a plethora of food safety regulations – a credit system for good producers, more stringent rules on infant formula, a tripling of fines for violators, a new food safety foundation and the inevitable CFDA app. But, as ever, enforcement is a very different thing to law-making, and the latter without the former is ultimately pointless.

China column  food production  food supply chain  Wal-Mart