Walmart tells Beijing to improve food labelling rules

Retailer in surprise push to make producers more accountable after paying $9.8m in fines

India is to launch an inquiry into claims that the American supermarket giant Walmart spent millions of dollars on a lobbying campaign to persuade its government to allow it to open stores throughout the country.
Walmart wants manufacturers to bear more responsibility Credit: Photo: EPA

For most international companies, getting ahead in China means playing by Chinese rules. However, the world’s biggest retailer, Walmart, has taken the unusual step of asking Beijing to rewrite them.

The supermarket giant, whose international empire includes Asda, has challenged China to make food manufacturers and suppliers more accountable for problem labelling, instead of placing the burden on retailers.

Executives are reported to have met China’s Food and Drug Administration after being fined scores of times for labelling breaches.

Many complaints have been minor. In 2012 Walmart was fined $383 (£228) for selling food with a label that had English letters printed larger than the Chinese ones. Last March, it was slapped with a $667 penalty for missing the edible rice paper wrapper off a list of ingredients. Then came a $486 fine for using the wrong font size, and a $2,323 fine for omitting the correct botanical name for almonds.

One might not expect Walmart – a $250bn heavyweight – to care about such trifling punishments, which over the past three years have added up to $9.8m. After all, this is the biggest retailer in the world, which rakes in five times that figure in profits every single day.

Paying the fines may also seem like a small price to pay for a chance of a bigger bite of China’s $1 trillion grocery market.

However, the tipping point for Walmart came earlier this year when it was forced to recall hundreds of packages of donkey meat. In a case which echoes of 2013’s horse-meat scandal in Britain, the packages were found to contain fox DNA, and threatened to put a serious dent in Walmart’s reputation for quality.

Walmart had already gone to some lengths to combat these sorts of problem. Food testers at its Chinese distribution centres check more than 600 products a day, to ensure they are up to scratch. After the fox debacle, they added DNA tests to their routine inspections.

However, Walmart also wants manufacturers to bear more responsibility.

Executives at the Arkansas retailer have urged China’s Food and Drug Administration to carry out inspections of all companies which handle food, not just retailers, and to make manufacturers responsible for their own breaches.

The manufacturers “aren’t accountable. We’re accountable,” Greg Foran, Walmart’s China chief, told the Wall Street Journal.

That might seem a reasonable position to take, but tackling the problem in this fashion amounted to a major breach of Chinese protocol that may come to be viewed as a watershed moment. International companies are still tightly controlled in China, and have historically made much more commercial headway when they have gone along with Beijing’s rules.

“It’s not something you see often in China,” said Ben Cavender, a senior analyst at China Market Research Group.

GlaxoSmithKline, the British pharmaceuticals behemoth, was so cowed by China following serious corruption charges, that it has been suggested it could beat a retreat altogether. Internet companies such as Facebook and Google, which wield enormous power in most territories, only have a minor presence in China because they refuse to co-operate with state censorship rules.

Walmart is in a different position, however. Not only is it a major employer in China, its international operations mean it is also the largest American buyer of Chinese-manufactured goods, and its eighth-largest trading partner worldwide – ahead of most countries.