By Laurie Burkitt
BEIJING-- Wal-Mart Stores Inc. said Tuesday it will triple its
spending on food safety in China to 300 million yuan ($48.2
million) by the end of 2015 amid scrutiny of its operations by
officials there.
Wal-Mart's chief compliance officer for China, Paul Gallemore,
said the Bentonville, Ark., retailer is increasing its food-safety
investment from the 100 million yuan it previously pledged to spend
between 2013 and 2015. The funding will go toward additional food
testing and supplier audits, Mr. Gallemore said, adding that
Wal-Mart will expand DNA testing on meat products this year.
Wal-Mart was alerted to the need for DNA testing in January after
it found fox meat labeled as donkey meat at stores in China.
Wal-Mart is also adding mobile testing labs that can travel from
store to store to check products and is investing in technology
such as iPads to help individual food safety training for
employees, Mr. Gallemore.
"We see this as our future home market," said Mr. Gallemore,
adding that the company sees China as a long-term growth
market.
China's regulators have fined Wal-Mart $9.8 million over the
past three years on such claims as selling poor-quality products
and using misleading pricing.
Wal-Mart executives said in an interview with The Wall Street
Journal earlier this year that they believe the responsibility of
ensuring food safety is unfairly falling on retailers rather than
manufacturers. They also said that they had been meeting with
officials and urging them to add inspectors at manufacturing
facilities and meat-processing plants.
Mr. Gallemore said Chinese officials have signaled to the
retailer that they are working to shift the focus to manufacturers,
though it hasn't yet seen evidence of more inspectors at
suppliers.
"We have the ear of the government," he said. He added that
store inspections by regulators have remained steady in the past
few months but fines have slowed. Around 4% of Wal-Mart's 7,000
suppliers in China have failed testing and audits in recent years
and Wal-Mart has moved to cut them, he said.
Wal-Mart has previously announced plans to ratchet up its
testing and inspections. Food testers at Wal-Mart distribution
centers in China check more than 600 products daily to catch flaws
before products such as meats and vegetables are sent out to
stores, according to the company.
The Chinese government has faced rising pressure from the
country's growing consumer class to clean up the food supply. In a
survey last year of more than 3,200 Chinese people, 38% said food
safety is a "very big problem," up from 12% in 2008, according to
Pew Research.
Experts say the government has improved food safety since 2008,
when six infants died and more than 300,000 fell ill because dairy
producers added the industrial chemical melamine to watered-down
milk.
Wal-Mart announced in May plans to invest 580 million yuan to
remodel 55 of its 400-plus stores in China and to roll out 30 new
stores and some additional distribution centers this year in the
country as a part of three-year growth plan announced in
October.
China is an important growth market for Wal-Mart. The retailer
is No. 3 in market share in the country, according to the most
recent data from market research firm Euromonitor International.
That's behind No. 2 China Resources Enterprise Ltd., which operates
4,100 stores under 10 different retail brands, and No. 1 Sun Art
Retail Group Ltd., a joint venture between Taiwanese conglomerate
Ruentex Industries Ltd. and France's Groupe Auchan SA.
Write to Laurie Burkitt at laurie.burkitt@wsj.com
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