Beech Nut Nutrition Case Study

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When selecting our case, we wanted to choose a company that a majority of our class wouldn’t have heard of before. We were researching possible topics and companies and came across Beech-Nut Nutrition Corporation. The company sold a wide variety of products ranging from vacuum-sealed jars of bacon to chewing gum from its inception in 1890. However, Beech-Nut’s most lucrative product was its baby food, which began around the 1930s. At this time, the company was the second largest producer of baby food products in the U.S. The company differentiated itself from competitors by packaging its product in glass jars rather than cans, which were used by most manufacturers. Their baby food line did well, but sales took off with the arrival of the postwar baby boom, where sales nearly doubled between 1948 and 1950. By 1950, Beech-Nut had 48 different types of jarred baby foods that provided more than a quarter of the company’s $70 million of revenue. Through multiple mergers and acquisitions, Beech-Nut was eventually purchased as a subsidiary of Nestle with hopes of turning the product around after a few years of hardship. Nestle had the marketing and advertising budget Beech-Nut needed to gain a share of the competitive market. By 1986, Beech-Nut had regained its spot as the second largest producer of baby food products with 20% of the market share. The company was able to build a reputation for pure, high-quality products. However, this was not the case. Due to financial hardships, Beech-Nut signed a contract with Interjuice Trading Corporation, a wholesaler who produced apple juice concentrate that was sold well below the market price. This lower price saved the company about $250,000 a year. Initial tests of the apple juice concentr... ... middle of paper ... ...ces and the tough decisions executives must make between the delicate balance of production costs and quality. We learned a lot through this case, including the process following the unearthing of a large-scale fraud by a leading baby food producer. Even though the executives and the company got away with their fraudulent behavior for a good amount of time, eventually their actions were brought to light and not only did they face the consequences of their actions, the company’s reputation suffered tremendously due to their choices. Additionally, we gained a greater understanding of the fraud triangle and how intense external and internal pressure can create the need to make unethical decisions. Lastly, we learned that fraud does not only consist of the misappropriation of assets. In this case the fraud was purposeful misrepresentation of information and not assets.

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