INTRODUCTION:

Beech- Nut Corporation founded in 1891. The company had once been a large diversified food
concern selling such products as Life Savers, Table Talk pies and Tetley Tea. Beech Nut was a
subsidiary of Nestle, a company known for its quality standards. It had an image of providing its
customers with natural foods. The primary market of Beech nut is US Northeast, Midwest and
California. The company had exports going out to 45 countries. It produced about 200 different
baby food lines including juices, strained foods and juniors combinations of soft vegetables or
fruit for older babies. Apple juice products that accounted for 30% sales were a major item.
This case starts with Newton who is known for the Apple Fall and all the laws of gravity
revolve around that Apple phenomenon. Then after centuries there is a Saga of Steve Jobs
which is also known for its Apple phenomenon. Two Apples changed the world, all the
concepts and digitalization revolves around Apple.
But here is another saga of Apple which is concentrated and all the worth of company is on
stake. Yes, it is the Beech-Nut Nutrition Corporation case. Form the last three decades the
company plays in many different hands but now it is in the yard of Nestle, One of the largest
food companies of the world.

FACTS:
Universal concentrate was 20-25% cheaper than that of other suppliers.
The Apple concentrate used in Beech Nuts Apple juice was supplied by Universal juice
Company
Beechnuts Research team had worked on many tests but it was difficult to come to any
conclusions about purity as the results were dependent on numerous factors. However,
the company had never received any customer complaints
Processed Apples institute suspected concentrate adulteration in Beech Nuts Apple Juice
which was found to be true after the PAI Laboratory Test.
The quality assurance head of Beechnut was suspicious of PAIs motive and was of the
view that it may be working for the interest of domestic Apple Growers.
The PAI test was of a private laboratory and had not yet been adopted by the FBA or the
Association of Official Analytical Chemists.
Beechnuts Apple juice was declared one of the purest by A New York Times article
based on FDA results.
The companys sales were $79 million.
Beech-Nut had about 200 different food lines including: Juices, Strained food, Juniors
(combination of soft vegetables or fruit) and Cereal
Nestle invested $60 million to upgrade the plant and increased their marketing budget to
provide high quality.
Juices accounted to 68% of the entire sales and out of which the apple juice products
dominated the category with 30% of sales.
The market share for beech nut juices was 19.3%
Beech-Nut was clearly failing in reaching its target of $705,000 profit.
In 1979 again it was found that the concentrate was almost pure sugar syrup. It was
decided that it should be used for mixed fruit juices but not for pure apple juice.
It was difficult to find the suppliers capable of meeting Beechnuts requirement for taste,
color and quality.










CORE ISSUE: Ethical Dilemma
To go with the ethical standards or to go for profitability
All the worth of Beech-Nut Company is on stake. Form the last three decades the company
plays in many different hands but now it is in the yard of Nestle, One of the largest
food companies of the world.
Anderson, the CEO BeechNut Nutrition Corporation is thinking what to do?
About the phony concentrate which was found in the Apple juice tanker in New York Plant. The
company claims of 100% pure juices are on stake. Who was responsible for this?
Are suppliers are responsible for that concentrate sugar traces in the Apple juice? OR it is
due to the negligence from the companys plant and quality assurance side. Same issue did occur
in the past too when in 1978 it was found by the company that apple concentrate was adulterated
but the issue wasnt taken seriously now even Nestle reports have shown that the apple juice is
false. Issue for the company is that they couldnt afford to change the supplier at this point in
time as mentioned by Anderson because of high cost of switching not only that Universal is
providing them concentrate at a cheaper rate than other suppliers available in the market. There
are no conclusive tests for purity. If the company leaves Universal without any conclusive
evidence of their concentrate being impure, the company had to incur high cost to compensate
the supplier against a possible breach of contract. Although the company can keep on selling the
concentrate according to a law firm but in case its not pure it will not be an ethical practice by
the company and can ruin the image of company in case the news spreads
As a consequence, FDA could create problems for the company and hence could harm its
business and competitive position in the market by publicizing and adulterated products.




Other issues:
Competitions from Heinz and Gerber, as the companies were spending huge dollars on
increasing their market share.
Due to financial limitation the company was facing difficulty in finding new suppliers for
juices.
Difficulty in finding alternative supplies for juice concentrate.

Alternative decisions:
Decision 1 (Beech-Nut file case against Universal J uice Company and discard the remaining
inventory):
The company must file case against the universal juice company because this is not a small thing
its a serious issue and claim loss from the universal juice of adulteration of it products. In order
to file a law suit against it supplier, Beech-Nut needs to collect information from quality
assurance department and should collect proof against its supplier. This option will also lead to
bad publicity for the company.
Decision 2 (no action should be taken):
Beech-Nut shouldnt let the matter take into the court and not file a lawsuit/complaint against
Universal because it will affect companys reputation and in return Beech- Nut would bear a loss
by losing returns and profits. Moreover, Beech-Nut had to face the inquiry carried out by the
FDA and the negative image of the company would be portrayed. Therefore this solution is not
appropriate.
Decision 3 (revise its contract):
Beech-Nut should revise the agreement with the Universal Juice Company by setting thier
conditions and policies which will not be compromised and should include clause that all
adulterated products would be returned and a penalty would be charged on them. As a result this
would force the Universal Juice Company to provide quality products to Beech-Nut as otherwise
it would have to face the penalty along with returned sales.
Final decision:
We suggest the 1
st
decision that Beech Nut should file a case against Universal company because
this type of information cant be hide from public and media and in the future when this news
become public it will still harm their reputation so they should collect evidence against other
company and take them to court and hence needs to uphold the ethical standards. Though, this
option will result in the loss of 3.5 Million but one should never take risk with the health of
a person. Besides that it should also search for new health and quality conscious suppliers for
the concentrate. This adulteration may be done intentionally or unintentionally. Intentional
adulteration is a criminal act and punishable offense. If the case of adulteration is proven Beech-
Nut will face legal implications because there were clues of adulteration in the past and the
management of company continuously ignored the red flags because of profit motivation as
Universal supplied comparatively at a very low price. The company might face a large fine if
these allegations are proven and the company continued to ignore all these allegations.
There have been constant doubts regarding the quality of Universal supplies. The company
should sever its ties with universal immediately even before the test comes back. The test results
should not have any weight in the decision. The company survived on its claim of 100 natural
and the concept of nutrition which was also evident in its name.
The image of the company can be adversely impacted if concerns regarding the quality of
supplies continue to come up. They should find a new permanent supplier although Universal
supplies are relatively cheaper. The cost factor should not stop them from doing the right thing.
If they don't take swift action now the future profitability of the company will be destroyed and
they might never recover from this scandal again. Anderson should realize the fact that Beech
Nut is operating in food industry which has a direct impact on the health of people. Therefore, no
nonsense from anyone, let alone the supplier, should be tolerated.
FOOD and HEALTH business is like playing with the life of people. One cannot take risk
with that. Moreover, person tested once should never be given a chance again because he
can again down you with him.