BUSINESS POLICY

Beechnut nutrition corporation

Presented By:



Ahmed Suleiman
Aleena Sitwat Bhatti
Anum Sajid
Arshia 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 companys baby food division was made private under the beechnut name.
Despite the companys 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 1970S.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 universals 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 companys
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 cant 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 companys 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.