Walmart recalls donkey meat in China

Walmart Stores, the world's largest retailer, has recalled donkey meat sold at some outlets in China after tests showed the product contained the DNA of other animals, the U.S. company said.

Walmart will reimburse customers who bought the tainted "Five Spice" donkey meat and is helping local agencies in eastern Shandong province investigate its Chinese supplier, the company said late Wednesday in official posts on Weibo, China’s Twitter-like social networking site. The Shandong Food and Drug Administration earlier said the product contained fox meat.

The scandal could dent Walmart's reputation for quality in China's $1 trillion food and grocery market, where it plans to open 110 new stores in the next few years. China is the largest grocery market in the world and it is set to grow to $1.5 trillion by 2016, according to the Institute of Grocery Distribution.

"This is another hit on Walmart's brand, meaning wealthy shoppers will start to lose the trust they had before," said Shaun Rein, Shanghai-based managing director of China Market Research (CMR) Group. CMR estimates Walmart's market share fell to 5.2 percent from 7.5 percent over the last three years.

Donkey meat is a popular snack in some areas of China, although it only accounts for a tiny fraction of overall meat consumption. In 2011, China slaughtered 2.4 million donkeys, according to country's livestock industry yearbook.

Walmart, French grocer Carrefour, McDonald's Corp. and KFC parent company Yum Brands  have all come under fire in China over food safety issues, a sensitive topic in a country riddled with scares ranging from a fatal tainted milk scandal to recycled "gutter oil" used for cooking.

Walmart said it had set up an investigation team to look into the donkey meat incident, and would strengthen food safety rules and take legal action against the product supplier. It added that the person in charge at the supplier factory had already been detained.

"We are deeply sorry for this whole affair," said Walmart's China president and CEO, Greg Foran. "It is a deep lesson (for us) that we need to continue to increase investment in supplier management."

The U.S. retailer has a troubled past in China. In 2011 China fined Walmart, along with Carrefour, a combined $1.57 million for manipulating product prices.

Walmart was also fined that year in China for selling duck meat past its expiration date.

Yum has struggled to recover sales in China more than a year after a chicken supplier to KFC in the country was found to have used excessive levels of antibiotics. But analysts said the impact of the current scare would be far more subdued.

Walmart, which operates more than 400 facilities in China, competes with market leaders Sun Art Retail Group and China Resources Enterprise, which in August teamed up with U.K. retailer Tesco.

Reuters