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Food safety issues cast a shadow over China’s O2O sector

By NexChange
Venture Capital

food In China, where public confidence has been shaken by a series of food safety-related scandals, the growth of venture-backed startups developing tech solutions for the country’s fractured supply chains should be welcome. But it’s not that simple. Tech In Asia reports that China’s booming online-to-offline (O2O) sector has been getting some n   egative attention from the jittery Shanghai State Food and Drug Administration (SFDA) which has accused a number of O2O startups -- including delivery startups and group buying sites -- of getting a little slack with the rules. Most of the issues are to do with permits and the startups sourcing food from unlicensed operators. It includes some pretty big names too, such as Meituan, Dianpig, and Ele.me -- which recently raised $630 million from the likes of CITIC Capital, Tencent, JD, and Sequoia. For this infraction, the startups can expect both a fine and a criminal investigation, but that should be the least of their worries. If any venture-backed startup gets embroiled in debacle on the scale of the 2008 Chinese milk scandal – which left four infants killed, and 50,000 more hospitalized – it could seriously threaten the future growth of the country’s burgeoning O2O industry and the billions of the venture capital cash riding on it. It's enough to put you off your lunch.
Photo: Krista

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