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?