business policy

Beechnut nutrition corporation

Presented By:

Ahmed SuleimanAleena Sitwat Bhatti

Anum SajidArshia Azhar

Presented To:Prof. F.A. Fareedy

BEECH-NUT NUTRITION CORPORATION

CASE STUDY ANALYSIS

Introduction

Beech nut was primarily a baby food company with its primary markets in US northeast and mid

west including California along with exports to 45 countries. 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.

In year 1973, the company’s baby food division was made private under the beechnut name.

Despite the company’s image as provider of natural foods, the company faced cash difficulties

owing millions to suppliers. The company was also looking for a buyer in late 1970’S.The

Company was bought by Nestle for 35 million in 1979.

The subsidiaries of nestle operated independtly and were meant to operate high standards and its

commitment to quality food products. Nestle renamed the company as beechnut nutrition

corporation to reflect its commitment to nutrition. Gerber was the baby food industry market

leader with a 70% market share .Placed at second position was beechnut and Heinz with about

155 shares. The expectation of increase in birth rate gives sales opportunities in long term and

profitability in this industry.

Issues:

Financial difficulties

With high debt and ever increasing need to service debt, the company faced cash flow problems.

Without the up gradation of one of their plants they fell short on meeting the “pure or natural

food” image in front of the consumers.

Lower bargaining power of beechnut as buyer

It was difficult to find an alternative supplier capable of meeting beechnuts requirements of taste,

color and quality. The universal’s concentrate was 20-255 cheaper and condensed which reduced

cost of transportation.

Incorrect information provided by Universal

it caused a problem for beech-nut by providing them incorrect information about their facilities

in 1978, which caused credibility issues against Universal.

Losing sales

Deterioration of sales in the face of faulty ingredients provided by universal.

The denial attitude

Pertaining to the claims of adulteration and unsolicited from nestle which highlighted the fact

that apple juice was false, the storer and the supplier universal made no response and follow up

towards improvement, which was urgency of the situation. Nestle in this case, could call off the

deal

CORE PROBLEM:

Baby food is such a segment which does not leave any room for compromising quality standards

thus, professional ethics should be the first priority so they cannot risk putting the company’s

repute is at stake.

“ Filing a lawsuit against universal following the claims of adulteration in concentrate”

Decision criteria:

Company Reputation

Legal issue resolution

Ethics

Financial Performance

Organization integrity

Supplier Relation

Decision Alternatives

Option 1. Continue to sell juice and maintain links with the supplier

Circumstantial evidence can’t hold up in court

Supplier sells 25% cheaper than others.

Inventory wastage cost will be 700000 cases of apple juice.

Legal team had given them the all clear.

Option 2. Dissolve the contract with universal in order to maintain the company’s image

and the ethic pertaining to the sensitivity of the food industry

Maintain integrity

Do not compromise on the issue of food fraud

O% tolerance for adulteration

Stringent controls need to be developed

Better testing methods

Nestle needs to think about its overall image and Beechnut needs to focus on its image.

Solution

We should resort to alternative 2 pertaining to the claims of adulteration and presence of faulty

ingredients in apple concentrate by universal. Moreover the false information provided by the

supplier about their facilities also needs to be addressed.

As the company is a subsidiary of nestle which is highly committed towards standards and

quality beechnut must formulate stringent checks and balances for its apple juice concentrate in

order to maintain its sales and market share even if at the cost of incurring loss on the inventory.

This alternative focuses more on long term gains at the current inventory.