BOGUS APPLE

JUICE
PATTERN OF PRESENTATION:

• Company overview
• Ethics: The keystone
• Drivers of unethical behavior
• The case
• Company’s 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
KEYSTONE
Ethics is defined as the “discipline dealing with what is
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
 BEHAVIOUR
Excessive pursuit for personal gain, wealth and
other selfish interest.

 Heavy pressures on company to meet the

earning’s 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-Nut’s 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.
 COMPANY’S 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
 Hoyvald’s claims of selling high quality product
 Lavery’s 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
 Hoyvald’s 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 management’s attention, and you were
called “naïve” and “idealistic” in response?
•Is Hoyvald’s conduct representative of a CEO? Was he
doing his job in difficult circumstances and what Nestle
expected of him?