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New York-listed Dingdong makes public apology after Beijing market regulator finds food security issues

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As the interest in consumer protection rides high in China amid an annual TV gala which focuses on the issue, New York-listed online fresh grocery giant Dingdong Maicai on Thursday apologised after Beijing's local market regulator ordered it to "fulfil food safety responsibilities", according to a government announcement.

Beijing's Haidian Market Supervision Bureau on Wednesday summoned online fresh grocery delivery platform Dingdong Maicai in relation to food safety issues including selling dead fish while marketing it as live fish and recycling vegetables that were past their sell-by date. An undercover report on food safety issues at Dingdong was first published by local newspaper Beijing News on March 15, World Consumer Rights Day, and the day that China Central Television broadcast its annual 315 gala, which focuses on abuses of consumer rights.

Dingdong, a Shanghai-based company which made an initial public offering in New York last June, had already began an investigation of all frontline fulfilment stations and service processes across the country before the recent regulatory statement, it said in its apology, which first appeared on microblogging site Weibo.

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"Upon seeing the claim about the food quality issues in one of our Beijing facilities, Dingdong immediately ceased operations of the facilities in question. After an investigation conducted by a task force headed by our CEO, we confirmed the veracity of the claim," a spokesperson told the South China Morning Post.

"Dingdong has since conducted an investigation into all of its frontline fulfilment stations and processes to ensure all standards are strictly enforced," the spokesperson said. The apology also said that the company would reflect on the assessment mechanism of its fulfilment stations and upgrade surveillance hardware for them.

Beijing's local regulator will "guide the company to conduct comprehensive self-examination of 124 frontline fulfilment stations, proactively discover risks and eliminate hidden dangers," the announcement read. It added that the bureau has organised 30 market supervision offices to carry out full-coverage special inspections on the fulfilment stations of other fresh food e-commerce platforms, such as Meituan Maicai and Missfresh.

Meituan, which is listed on the Hong Kong stock exchange, and Nasdaq-listed Missfresh did not immediately respond to a request for comment about the inspections.

China's online grocery sector expanded during the pandemic as more people shopped at home. The market was worth about 5 trillion yuan (US$786 million) in 2020 and is expected to reach 6.8 trillion yuan in 2025, according to a 2021 report by market research firm iResearch.

Frontline fulfilment stations, also known as "dark stores" or distributed mini-warehouses, are seen as an optimisation of supply chain management to fulfil last-mile orders, and Dingdong and Missfresh are China's industry pioneers of this area. Meanwhile, Alibaba Group Holding's Freshippo is known for using a combination of consumer-facing stores and warehouses, different from the dark-store approach. Alibaba also owns the Post.

The stations are key to ensuring short delivery time to Chinese consumers in cities, which is around 30 minutes for both Dingdong and Missfresh. Dingdong has built more than 1,300 dark stores in 30 cities as of last March, according to the company. Missfresh reported that its distributed mini-warehouses covered 17 cities as of the third quarter of 2021.

Dingdong's stock price reached US$2.55 at the market close on March 15, a historic low since its June IPO, before gradually bouncing back in the days after. The stock prices of Dingdong and Missfresh slipped around 10 per cent and 3 per cent respectively on Thursday.

Dingdong was fined around 390,000 yuan this January by the Shanghai Pudong Market Supervision Bureau for "producing and operating foods and food additives with contamination and harmful materials that exceed food safety limits," according to business intelligence platform Tianyancha.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.