Beech-Nut Nutrition Corp: Case Study on Ethical Violations

Beech-Nut Nutrition Corp Oscar Ratsaphangthong BUSN311- Week 7 Assignment American Public University Dr. Mark Gambill 24 December 2023

Overview • Introduction • Case Study • Decision • Laws Violated • Results • Damage effects • Ethical Framework • Legal Issues Cont. • Conclusion • References

Introduction • Beech-Nut Nutrition Corp • A company that manufactures baby food and snacks that started in 1931. The name is well- known in the baby industry. • Corporate Structure • Privately held company • Acquired by Swiss company Hero Group

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Case Study • Beech-Nut Nutrition Corp was aware their apple juice concentrate was adulterated with various artificial flavors and sugars (Everstine, Spink, & Kennedy, 2013). • Continued to buy from the same supplier and market the product as “100% apple juice.” • Company was found guilty of intentionally distributing jars of phony apple juice for babies.

Decision • The company made the mistake to continue to market their product as “100% apple juice.” • Apple juice concentrate they were supplied with was 20-25% below market price (Everstine, Spink, & Kennedy, 2013). • The right decision would have been to advertise their product as just juice.

Laws Violated • Federal Food, Drug, and Cosmetic Act (FD&C Act/21 U.S.C) • A set of laws the Federal Drug Administration (FDA) follows to oversee and control the production, sale, distribution of food, drugs, and cosmetics. • The purpose of the FD&C Act is to protect the public from misbranded and adulterated items.

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Results Beech-Nut Nutrition Corp was found guilty of adulterated and misbranded apple juice violating 21 U.S.C. Secs. 342(b) and 331(a) Nies L. Hoyvald, president of Beech-Nut, was fined $10,000 with a possible 3-year prison term. Company was fined $2 million. Acted to recall all products and introduce new testing procedures for quality control.

Damage Effects • Although no third parties were harmed by the decision of Beech-Nut, the company only suffered a $2 million fine along with the investigation cost of the FDA. The issue did not have a short-term impact on Beech-Nuts stockholders and consumers (Buder, 1988).

Ethical Framework • The ethical framework demonstrated by the company is egoism. • Egoism is defined as the decisions made from the outcome that will benefit the decision maker. The individual or group will act for the greatest good for themselves (Dagnoli, 1988). • Example: BP Exploration and Production chose to continue operations despite having many safety hazards to gain short-term profit which resulted in the accident of the oil spill.

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Ethical Framework Illustrated by continuing to use the apple juice concentrate below market price and mislabeling it as “100% apple juice” to minimize cost of production. Comparing to the last example, both companies made decisions to benefit themselves and not considering the effects of others in the long- term.

Ethical Framework Cont. • Deontology- Focuses on the universal moral and principles for decision making. Rules are inherently right, regardless of the outcome (Vadastreanu & Majer, 2015). • If Beech Nut used Deontology as their ethical framework, it would have resulted in the company choosing a different supplier or labeling their product correctly. • Example: A business requires a trademark for their brand, they follow the laws and rules to create their own instead of copying another business.

• In addition to the false marketing of apple juice, Vice president John F. Lavery was found guilty of 18 counts of mail fraud under 18 U.S.C. Sec 1341. • Lavery was also convicted of conspiracy 18 U.S.C. Sec 371 (Buder, 1988). Legal Issues Cont.

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Conclusion • Beech-Nut Nutrition Corp must prioritize ethical and legal responsibility in their business practices along with a new framework of deontology to do right in society Chen, Hang, Pavelin, & Porter, 2020). • Prioritizing legal and ethical responsibility will prevent future scandalous cases. • Focus on Triple Bottom Line theory.

References • Beech-Nut. (2023, December 19). Our story & mission- since 1931 Beech-Nut® Baby Food. Beech. https://www.beechnut.com/our-story/#:~:text=history,safety%20standard %20in%20the%20industry. • Buder, L. (1988, Feb 18). 2 former executives of Beech-Nut guilty in phony juice case. New York Times. http://ezproxy.apus.edu/login?qurl=https%3A%2F%2Fwww.proquest.com %2Fnewspapers%2F2-former-executives-beech-nut-guilty-phony-juice%2Fdocview%2F426744264%2Fse-2%3Faccountid%3D8289 • Chen, Z., Hang, H., Pavelin, S., & Porter, L. (2020). Corporate Social (Ir)responsibility and Corporate Hypocrisy: Warmth, Motive and the Protective Value of Corporate Social Responsibility. Business Ethics Quarterly, 30(4), 486–524. https://doi.org/10.1017/beq.2019.50 • Dagnoli, J. (1988). Beech-Nut ready to fight back; $15M backs Stages line. Advertising Age, 59(49), 6-. • Everstine, K., Spink, J., & Kennedy, S. (2013). Economically motivated adulteration (EMA) of food: Common characteristics of EMA incidents. Journal of Food Protection, 76(4), 723-35. http://ezproxy.apus.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Feconomically-motivated-adulteration-ema-food%2Fdocview%2F1335047045% 2Fse-2%3Faccountid%3D8289 • Kerest, S. (2023, March 21). Beech-Nut® Nutrition Company launches Dino Biscuits Snack. Business Wire. https://www.businesswire.com/news/home/20230321005261/en/Beech-Nut%C2%AE-Nutrition-Company-Launches-Dino-Biscuits-Snack • Mattson, M. (2023). Corporate Social Responsibility and the Triple Bottom Line. Business ethics. https://philosophia.uncg.edu/phi361-matteson/module-3-social-responsibility- professionalism-and-loyalty/corporate-social-responsibility-and-the-triple-bottom-line/ • Patel, P. (2023, July 31). Food, Drug, Cosmetic Act- NCBI. National Center for Biotechnology Information. https://www.ncbi.nlm.nih.gov/books/NBK585046/ • US EPA. (2023, August 14). Deepwater Horizon – BP Gulf of mexico oil spill | US EPA. Enforcement . https://www.epa.gov/enforcement/deepwater-horizon-bp-gulf-mexico-oil-spill • Vadastreanu, A. M., Maier, D., & Maier, A. (2015). Is the Success Possible in Compliance with Ethics and Deontology in Business? Procedia Economics and Finance, 26, 1068–1073. https://doi.org/10.1016/S2212-5671(15)00931-4

Beech-Nut Nutrition Corp

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