The rotten meat scandal at a Shanghai factory has hit customer McDonald's bottom line, with sales at the fast-food giant's restaurants in the Asia Pacific, Middle East and Africa dropping 7.2 per cent last month.
The company said in its monthly sales report the steep decline was caused by the impact of food-quality and safety issues at a food supplier in China - without naming the company.
Shanghai Husi Food, whose parent is the US-based OSI Group, was a key supplier to McDonald's and other food companies before the scandal over its repackaging of out-of-date meat products erupted.
McDonald's said its full-year global sales target was now at risk as customers deserted its restaurants in droves. China and Japan accounted for 10 per cent of sales, the company said.
Worldwide sales fell 2.5 per cent last month. Sales in Europe rose 0.5 per cent but US sales fell 3.2 per cent amid fierce competition. Analysts expected a 1.1 per cent fall in total sales, according to Consensus Metrix.
"We intend to strengthen our performance by addressing the current business headwinds with the discipline and conviction that inspire our customers' trust and loyalty," McDonald's chief executive Don Thompson said.
Sales in Africa, Asia and the Middle East had increased 1.1 per cent for the second quarter of this year, prompting bullish assessments by McDonald's executives of its growth prospects in emerging markets such as China.
McDonald's in mainland China only this week resumed full-menu sales, two weeks after it cut ties with Shanghai Husi.
In Hong Kong, the scandal triggered a probe by the Centre for Food Safety into whether McDonald's knowingly sold potentially tainted food to the public over a four-day period during which it denied using food from Shanghai Husi. It later admitted that it had in fact been supplied by Husi.
Outlets pulled menu items that came from Husi plants in Shanghai and Guangzhou.
Additional reporting by Reuters