Keeping the Mystery Out of China's Meat

Photograph by Leela Punyaratabandhu

When the yellow liquid in a test tube containing tiny pieces of string beans turns clear, Chloe Fan knows why. A nearby computer screen quickly confirms her suspicion: Pesticide levels in the sample are twice as high as accepted standards. Fan, a Wal-Mart Stores (WMT) food scientist in Guangzhou, runs another test, then has the shipment of beans pulled, stopping a batch of chemical-laced vegetables from reaching customers at the retailer’s stores in China. Hers is a job that can’t be taken for granted. “China has food safety rules,” says Fan, 24, clad in a white laboratory coat and surrounded by beakers and test tubes, “but not all suppliers in China understand and follow them.”

Wal-Mart has learned that lesson repeatedly on the mainland, most recently when authorities earlier this year said meat sold as donkey at its Chinese stores contained fox DNA, triggering a recall by the Bentonville (Ark.)-based retailer. That wasn’t an isolated occurrence. A seemingly endless string of scandals—from melamine-tainted milk that killed six infants and sickened 300,000 others in 2008 to rat meat recently sold as mutton—has made China the Wild West of food safety. Inadequate government oversight also is forcing big Western companies, from Wal-Mart toNestlé (NESN:VX) to French supermarket operator Carrefour (CA:FP), to put on their sheriff’s hats and take food policing into their own hands.

The reason is simple: Western companies that sell tainted products can suffer damage to their reputations and incur legal liabilities, even if they had nothing to do with the manufacturing of the goods. “Many giant retailers have a strong incentive to take actions where state and local governments are not doing what they are supposed to do,” says Ching-Fu Lin, a researcher at the Asian Center for WTO and International Health Law and Policy.

Wal-Mart promised to boost inspections of suppliers after the donkey meat recall and now conducts more DNA tests of meat in China than it does anywhere else in the world. The company already had said last May that it would spend 100 million yuan ($16 million) over three years to increase food safety in China after being stung by previous scandals there, including the sale of sesame oil and squid with hazardous levels of chemicals in 2012 and the mislabeling of regular pork as organic the year before. Wal-Mart says that since 2012 it has slashed its number of pork suppliers in China by almost 80 percent, to about 100, to ensure better food quality and more supplier accountability.

The world’s largest retailer has two vans making unannounced visits to stores every day to take samples of vegetables, seafood, and meat to check for melamine in dairy products, clenbuterol in pork, and excessive antibiotics in chicken. It does this only in China.

Nestlé says it employs more inspectors and scientists to perform quality tests on the milk at its Chinese dairy factories than in any other country. And, unlike in other nations, the company employs full-time staff to visit dairy farms, teaching ways to improve herds through animal vaccinations and special feeds. It will also open a dairy university in China this year to educate milk farmers—its first worldwide.

Carrefour has also set up 50 laboratories in China to test for pesticide residues and excessive food additives, and its shoppers can scan QR codes, which can be read by smartphones, to trace the production origins and expiration dates of products and the growers of fruits and vegetables. China is the only country where it goes to such lengths to reassure customers.

The world’s largest milk producer, Fonterra Co-operative Group, has gone even further. Each year since 2007, it has transported via cargo ship as many as 7,000 cows from its New Zealand home to its large-scale dairy farms on the mainland. Operating its own farms is a first for the Auckland-based dairy co-op, which typically sources from local farmers. But it says it needs tighter control to guarantee safer milk sources in China.

Not being vigilant can be costly. Sales at Yum! Brands’ (YUM) KFC restaurants took a beating in 2013 after a widely publicized investigation in China of a former supplier that fed its birds large amounts of antibiotics and hormones to boost their weight. Despite a public apology by Yum in January 2013, sales at its KFC outlets in China fell 20 percent in the first quarter of 2013, and they continue to be hurt by public opinion.