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    Beech Nut Case Study

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    Anis Ur Rehman Kakakhel
    Beech-Nut Nutrition Corporation discovered in 1982 that the apple juice it was producing and selling for babies was made from concentrate that contained no actual apple. The company's president and vice president of operations decided to continue selling the bogus juice due to the $4.25 million cost of switching suppliers, even as the research director provided conclusive evidence of adulteration. They rejected offers to join lawsuits against the fraudulent supplier. Both executives were later convicted and sentenced to over a year in prison for unethically prioritizing profits over product quality and consumer safety.

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    Beech Nut Case Study

    Uploaded by

    Anis Ur Rehman Kakakhel
    1K views16 pages
    Beech-Nut Nutrition Corporation discovered in 1982 that the apple juice it was producing and selling for babies was made from concentrate that contained no actual apple. The company's president and vice president of operations decided to continue selling the bogus juice due to the $4.25 million cost of switching suppliers, even as the research director provided conclusive evidence of adulteration. They rejected offers to join lawsuits against the fraudulent supplier. Both executives were later convicted and sentenced to over a year in prison for unethically prioritizing profits over product quality and consumer safety.

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    Beech-Nut Nutrition Corporation discovered in 1982 that the apple juice it was producing and selling for babies was made from concentrate that contained no actual apple. The company's president and vice president of operations decided to continue selling the bogus juice due to the $4.25 million cost of switching suppliers, even as the research director provided conclusive evidence of adulteration. They rejected offers to join lawsuits against the fraudulent supplier. Both executives were later convicted and sentenced to over a year in prison for unethically prioritizing profits over product quality and consumer safety.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    1K views16 pages

    Beech Nut Case Study

    Uploaded by

    Anis Ur Rehman Kakakhel
    Beech-Nut Nutrition Corporation discovered in 1982 that the apple juice it was producing and selling for babies was made from concentrate that contained no actual apple. The company's president and vice president of operations decided to continue selling the bogus juice due to the $4.25 million cost of switching suppliers, even as the research director provided conclusive evidence of adulteration. They rejected offers to join lawsuits against the fraudulent supplier. Both executives were later convicted and sentenced to over a year in prison for unethically prioritizing profits over product quality and consumer safety.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 16

    BOGUS APPLE

    JUICE

    PATTERN OF PRESENTATION:

    Company overview
    Ethics: The keystone
    Drivers of unethical behavior
    The case
    Companys Dilemma
    Conclusion
    Questions for discussion

    COMPANY OVERVIEW
    Beech-Nut Nutrition Corporation is a baby
    food company that is currently owned by the Swiss
    branded consumer-goods firm Hero Group.
    Beech-Nut's roots go back to 1891, to the Mohawk
    Valley town of Canajoharie, New York. Started
    with the name The Imperial Packing Company
    Currently the company product line
    includes cereals, peanut butter, jam, pork and
    beans, ketchup, chili
    sauce, spaghetti, macaroni, marmalade,
    caramel, beverages, mints, chewing gum,
    and coffee.

    ETHICS: THE
    Ethics is defined
    as the discipline dealing with what is
    KEYSTONE
    good and what is bad ,with moral duty and obligation
    Business ethics is the application of general ethical
    principles and standards to business behavior.
    There are three Domains of human action:
    Domain of Codified Law (legal standard)
    Domain of Free Choice (personal standard)
    Domain of Ethics (social standard)

    DRIVERS OF
    UNETHICAL
    Excessive
    pursuit for personal gain, wealth and
    BEHAVIOUR

    other selfish interest.

    Heavy pressures on company to meet the


    earnings target.
    Company culture that puts profitability ahead of
    ethical behavior.

    KEY ROLE IN CASE

    Li Cari : Director of research and development


    John Lavery: Vice president operations
    Charles john: Purchase manager
    Paul Hillabush: director Quality assurance
    Nils Hoyvald: President of Beach nut
    Frank Nicolas: Owners of Beach nut

    The case
    BEECH-NUT
    1973, bought by Frank Nicholas and his partners
    1977 new supplier Interjuice Trading Corporation
    (universal juice company)
    Early savings from the contract amounted to about
    $250,000 a year on a $50 million operating budget

    Jerome J. LiCari, Beech-Nuts director of research and


    development tested the apple juice for adulteration.
    In 1981 LiCari done a more better conclusive test with
    evidences.
    1981, Nils Hoyvald joined as President
    Aim aggressively marketing top quality product

    In June 1982, he found:


    1. Strong evidence that Beech-Nut Apple Juice for
    babies was made from concentrate that include NO
    APPLE.
    2. John Lavery the vice president in charge of
    operation, brushed aside tests that showed the presence
    of corn sugar.

    COMPANYS
    DILEMMA

    To switch on the suppliers and


    recall the product already
    sold in the market.

    To carry the business as it is,


    continue selling their bogus
    apple juice in the market.

    Issues that Hoyvald took into consideration while


    arriving to decision:
    1. The cost involved in switching the suppliers which
    amounted as $4.25 million loss to the company for the
    first year n $.75 million each year
    Hoyvald decided to continue selling the bogus apple
    juice

    In start FDA asked them to join other companies in


    suing the universal juice company but they rejected
    this offer.
    Fear of that federal investigator might seize the
    stock of apple juice($3.5 million in inventory at stake)
    Aggressive foreign sales campaign (New jersey)

    Ethics - against beech-nut


    Baby Product
    Hoyvalds claims of selling high quality product
    Laverys indifference to unpleasant discoveries
    about the raw material
    Unethical Justification by the company
    Foreign Sales campaign in fear of TOTAL recall

    conclusion
    Hoyvald and Lavery tried and convicted
    Each sentenced for 1 year and 1 day
    Company settled a suit bought by consumers for $
    7.5 million
    Hoyvalds Lawyer seeked proposal for his client to
    give lectures in B-schools

    Questions For discussion?


    If a recall would have required closing down the
    company, is avoiding a recall a risk worth taking?
    What did Beech-Nut have to gain or lose by joining the
    Apple Processors lawsuit against Universal?
    What would be your response if you brought a potential
    problem to managements attention, and you were
    called nave and idealistic in response?
    Is Hoyvalds conduct representative of a CEO? Was he
    doing his job in difficult circumstances and what Nestle
    expected of him?

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