Wal-Mart Stores Inc.
) intends to increase its investment in food safety measures in
China to 300 million yuan ($48.32 million) over three years through
2015, up from 100 million yuan in the same period, announced last
year. Walmart also stated that it will increase DNA testing on meat
products and would regularly conduct supplier inspections. It will
also test more of its stores with its two mobile safety labs.
Last year, Walmart had planned to start a mobile food-inspection
program and increase supplier training, besides its plans to invest
100 million yuan to upgrade food safety measures in China.
China is a strategic market for Walmart and food safety remains
the top concern for consumers. However, the company has not been
able to maintain the set standards, which is denting its
Earlier this year, as per media reports, Walmart recalled all
products from its local vendor DezhouFujude Food Company Ltd.,
after fox DNA was identified in samples (
Walmart Recalls Meat Items from China
). Thereafter, Walmart called back its executive Rob Chester to the
U.S., who was earlier working as the chief compliance officer for
Walmart's China operations (
Walmart Moves its China Manager
). According to Bloomberg, the company had encountered similar
issues in China earlier like the mislabeling of pork in 2011.
Not only Walmart, Kentucky-based famous restaurateur
Yum! Brands Inc.
) also faced questions about the quality of chicken supplied to its
KFC units in China. Though Yum Brands' KFC division is working to
repair its reputation, sales in China continue to decline.
Walmart has been grappling with declining comp sales both in the
U.S. and abroad following the recent slowdown of the economy.
Moreover, amid several legal issues, the grocery giant had to part
ways with its Indian joint venture partner, Bharti Enterprises in
In such a scenario, we believe Walmart has to keep up its
reputation in China. In fact, the company expects China's food and
grocery market to be worth $1.5 trillion by 2016 and therefore very
important for retailers like Walmart. The company is thus geared to
expand its Sam's Club stores in China. Walmart currently has 404
stores in China and has plans to add as many as 110 stores by
Walmart currently holds a Zacks Rank #4 (Sell).
Some better ranked retailers include
Ingles Markets, Incorporated
The Koger Co.
), both of them carrying a Zacks Rank #2 (Buy).
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