A report on prevailing

situations (New Year Eve

Crisis) at “Michael’s
Homestyle Pasta” Company

Rahul Kumar Mishra, Section-B, Roll.No.-90

1. Executive Summary:
Michael Home Style pasta company has acquired the Florida based Southern Pasta Company
on 10/12/2001.On the eve of the new year, they came to know that the sea-food stuffed pasta
shells, supplied by southern pasta company to restaurant chains were tainted with salmonella.
This report is intended to assist the Michaels’s Pasta Company in exploring the various options
available to them in the current context. After careful analysis of various options, it is evident
that the best strategy at the moment is to elicit the sense of cooperation in the mind of restaurant
owners.
2. About Michael’s Homestyle Pasta:
Michale’s Home Style pasta company is a specialized stuffed pasta shell supplier, based out of
Connecticut. As on 2001, the company had around 100 employees and sales have reached $17
million. Southern Pasta company (based out of Florida) was the only company other than
Michael's, that made pasta shells stuffed with seafood. Mike Valenti, CEO of Michael’s pasta
company has succeeded to acquire the Southern pasta company (after the initial refusal by
Fredrich Walz (Owner of Southern) for two years) on 20 December 2001 and was expecting a
good business during the upcoming festive season. Owing to the family commitments, Mr.
Mike was not able to be physically present at Florida plant, however, his top two executives
spent almost half of their week at the Florida plant.
3. Problems/Challenges:
On the morning of New Year's Eve day, Mike and other top executives of Michael's came to
know that the seafood -stuffed pasta shells that Southern had just shipped to its biggest
customer, were tainted with salmonella. Salmonella bacteria was responsible for about 600
deaths a year. New year eve was one of the biggest night for the restaurants where stuffed
seafood pasta was a featured menu item. Since the infected pasta shells have been already
shipped out from the Southern Plant and reached restaurants, main challenge here is: “How to
stop the reach of these infected pasta shells to consumers” or ensure that the consumers have
the access of unadulterated pasta.
4. Analysis of the problem:
Acquisition of Sothern Pasta Company by Michael’s happened after the first salmonella
contamination of seafood stuffed pasta shells made by former in the May 2001. During the first
episode of contamination, recall and decontamination led to a huge loss to the Sothern pasta
company (more than half a million dollar). There was little information divulged by top
management of Southern pasta company during the acquisition process. There were deliberate
and successful attempts by top management of Southern, to falsify the laboratory test results.
Present episode of salmonella contamination has the potential to shut down Michael's pasta
company completely or loss of at least fifty percent of their revenue stream which came from
restaurant owners. After careful evaluation of current scenario, following options seem to
available for Mr. Mike Valenti.
I. Recall and destroy the contaminated batches of stuffed shells shipped during the month of
November and early December before they could reach to consumer (FDA will act only if
contaminated batches reach to the consumers).
II. As the current batches of stuffed shells were produced prior to the acquisition of Southern
pasta company and Mr. Fred has the record of all failed test results, the liability of current
situation could be placed on the previous owners of Southern Pasta Company.
III. Cooking standards require to cook the stuffed shells at a temperature more than 1600 F to kill
any contaminants, Mr. Mike can very well place the liability on restaurants owners also if
tainted shells are undercooked.
IV. Mr. Mike can trust on his instinct that restaurants chains will follow the cooking standards
and hence should take no action.
V. Inform the restaurant chains regarding current the restaurant owners regarding the current
situation and elicit some sense of cooperation by offering them alternate supply during this
high revenue period. Later, recall the tainted product and assist in the decontamination of
restaurants.
5. Evaluation of the options:
Immediate concern at this critical time is to somehow prevent the reach of the contaminated
shells to the consumer. At the same time, Mr. Mike cannot afford to lose the faith of the
restaurant chains which constitute approximately fifty percent of revenue generation. Option-I
is time-consuming and it may not be possible to recall all the shipped products before the end
of the day. There won't be any incentive for restaurant chains during this high earning period.
Liability can very well be placed on the previous owners of Southern Pasta Company as well
as on restaurant chains (Option-II and III) but this will mean that there is a fair possibility that
tainted product will reach to end consumers. This will essentially be the escaping from the
business ethics and not following the social responsibility. Option-IV is like doing nothing and
hoping that problem will get resolved on its own. If restaurant owners come to know about this
contamination on their own, then this will be a severe breach of trust. Option-V is most
appropriate in the current scenario. Mr. Mike can explain the criticality of the situation with
them and offer them an alternate product for this new year eve if possible. He can further
elaborate that the cooperation is the best way to survival in the current situation.
6. Recommendation:
It is recommended that Mr. Mike should start the effective communication (if possible visit of
company representatives to different restaurant chains) with restaurant owners as early as
possible and shall explain to them very clearly that shipped seafood stuffed pasta shells are
contaminated with salmonella. He should inform them that these batches were produced before
the acquisition of Southern pasta company and falsified test reports were the main reason for
the shipment of these contaminated pasta shells, yet he is not escaping from his responsibility
towards restaurants chains and the society. Best strategy for both the stakeholders at the present
situation shall be to “Collaborate”. Of course, restaurant chains would also not want to turn a
loss during this profit maximizing festive period, hence they might accept the offer of
substitution of tainted pasta shells. With the empathic communication, restaurants chains
would either agree to follow the strict cooking standards or accept the offer of replacement of
contaminated pasta shells.