Shanghai Husi fed expired meat to KFC and McDonald's — 10 charged, $3.6M in fines

Shanghai Husi Food, a Shanghai unit of the US-based OSI Group, supplied processed meat to China's biggest Western fast-food chains — McDonald's, KFC and Pizza Hut among them. In May–June 2013, Yum Brands returned a batch that did not meet its standards and ended some orders. What followed, as the court later established, was not a correction: from March 2013 to July 2014 the company's Shanghai and Hebei plants produced and sold substandard food, passing it off as qualified product.

On 20 July 2014, a Shanghai TV station broadcast secretly filmed footage from inside the plant: workers using expired meat and altering production dates. Within days, McDonald's and Yum cut ties with Husi; other chains followed, and six OSI China employees were held for questioning. For a stretch, McDonald's China ran a reduced menu.

The case ended in two sets of penalties. In February 2016, Shanghai's Jiading district court convicted both Husi companies of producing and selling fake and inferior products — fines of ¥1.2 million each, with ten defendants receiving prison sentences, the ringleader receiving three years. In October 2016, the food regulators' administrative fines were upheld by the court: ¥24.3 million in total, about $3.6 million. OSI called the convictions unjust and appealed.

After Yum returned a substandard batch, Husi faked production dates and sold it anyway; a TV sting exposed it, costing $3.6M in fines and every major client.

The failure was a decision: after Yum returned a batch for failing its standards, managers chose to pass substandard product as qualified. The court dated that conduct from March 2013 to July 2014.

The customer audits missed it because the supplier was built to pass them: a long-trusted vendor, OSI's Shanghai unit, with production dates and paperwork adjusted to look clean.

The exposure came from outside the audit system: a reporter with a hidden camera, not a quality inspector. That turned one supplier's failure into a crisis for every brand on the list.

The customer's audit had already spoken: the batch that began the case was returned by Yum for failing its standards. The supplier chose to fake production dates instead of fixing the line.

The scandal became a standard case in supply-chain teaching on the limits of scheduled supplier audits — the returned batch was the warning, and the hidden camera was the audit that finally worked.