In the wake of a food safety scandal regarding its meat supplier in China, McDonald’s Holdings Japan last week reported a net loss of 7.54 billion yen, approximately $65.8 million, for the period from January through September, according to the Japanese Kyodo News Service.
The news agency says this compares to a profit of 6.39 billion yen during the same time last year; the company looks to lose money for the first time in 11 years.
McDonald’s Japan says it has halted all imports of chicken products from China since July when the scandal broke.
“All store sales in Q3 have been largely affected by the situation involving Shanghai Husi,” the company reports. “In addition to a decline in profits caused by the decrease in sales stemming from the incident, related direct and indirect costs to our business, as well as strategic investments to regain our customers’ confidence in our food and recover the business, put further pressure on our overall profitability.”
Chinese media first reported the food safety negligence at Shanghai’s Husi Food Co., Ltd in July. Undercover footage obtained by the television station showed Husi employees relabeling expired meat and breaching other food safety rules.
In September, the McDonald’s Corporation said its global comparable sales (sales at all restaurants in operation for at least 13 months) decreased 3.7 percent in August. Sales in Asia took the hardest hit, down 14.5 percent, after the food safety scandal involving the company’s meat supplier rocked China. McDonald’s Asia market segment also includes the Middle East and Africa.
The company has since switched to sourcing its chicken from Thailand and is also planning to import from Brazil. The company says it expects to log a 2.7 billion yen charge for the year to write off unsold chicken from China.
McDonald’s Japan says it will invest in measures to improve quality management, which include unannounced audits of its suppliers and distribution of more food-quality information to customers.
“We are implementing a plan to recover our business by regaining our customers’ confidence in our food and further enhancing value for money by strengthening our focus on relevant pricing, menu innovation and modernizing our restaurants,” the company says.