Oct. 25 (Bloomberg) -- Wal-Mart Stores Inc. resumed operations today at all of its 13 stores in the Chinese city of Chongqing after officials ordered them shut for two weeks for mislabeling ordinary pork as organic.
Wal-Mart was fined and ordered by local officials to halt operations of the outlets in the southwestern city on Oct. 9 while police detained 37 employees. It was the most serious punishment the world’s largest retailer has faced in China since it entered the market in 1996.
Ed Chan, president of Wal-Mart’s China operations, resigned for personal reasons, the company said. Asia Chief Executive Officer Scott Price, who took control of China operations after Chan’s resignation, apologized to Chongqing Mayor Huang Qifan, promising to correct the problems.
“Wal-Mart should take this case as a lesson of doing business in China,” said Chang Dongliang, a Shanghai-based retailing analyst with Everbright Securities Co. “They should effectively correct mistakes, improve quality control, boost interaction with customers and rebuild the brand.”
An apology is posted on the right side of the entrance of a Wal-Mart store in southern Chongqing, where more than 30 people lined up before it opened today. On the other side is a sign advertising discounts on more than 60 items, including apples, Televisions, soap and pork, until Nov. 3. It had an image of a policeman and the Chinese characters for “safe Chongqing.”
The company is reviewing management procedures in all its China locations and Price visited outlets in six cities, Wal- Mart said in a Chinese-language statement today. A management company was hired to improve third-party inspection, employees in Chongqing received training and facilities to check food quality will be set up in branches in the city, the statement said.
“If Wal-Mart corrects its mistakes and improve, we still believe it’s a good company and will keep shopping,” said Rong Xuehua, 72, as she waited for a store to open. “You got good value for money at Wal-Mart.”
Since 2006, the Bentonville, Arkansas-based retailer has been cited for 21 cases of selling expired or substandard food and false advertising in Chongqing city. The failure to fix problems forced authorities to temporarily halt operations as a warning, Tang Chuan, director of law enforcement at the city’s Bureau of Inspection and Enforcement, said in an interview on Oct. 19.
Chongqing fined Wal-Mart 3.65 million yuan ($574,000) after 12 of 13 outlets in the city were found to have sold the mislabeled pork. The company pledged to cooperate with the investigation, which saw two employees arrested and 35 other people detained.
Wal-Mart entered China in 1996, less than a year after Carrefour SA arrived in December 1995. In the last decade, it has grown to 353 stores from eight in what it forecasts will be the world’s largest grocery market by 2014. The company reported annual revenue of $7.5 billion in China last year, about 1.8 percent of total sales worldwide.
Since 2005, Wal-Mart’s market share has more than doubled to 11.2 percent, making it second-largest in the country behind Sun Art Retail Group Ltd.
Wal-Mart customers will notice changes after the Chongqing stores resume, a Hong Kong-based spokesman, Anthony Rose, said while declining to be more specific. Tang of the Bureau of Inspection and Enforcement said Wal-Mart plans on-site food- safety testing labs and consumer-rights desks.
--Michael Wei, Bloomberg News, with assistance from Gregory Turk in Shanghai and Frank Longid in Hong Kong. Editors: Frank Longid, Lena Lee
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