BOC Week 3: Beech-Nut

Beech-Nut once the third largest baby food manufacturer in the United States behind Gerber and Heinz is now know for its bad reputation due to an apple juice scandal during the 1970’s. In the past, this century-old company produced foodstuffs ranging bacon to chewing gum, but it has been exclusively engaged in the babt food business since 1972. Beech-Nut n the 1930’s combined with Strained Co. and together they developed a baby food line which was very successful and gave parents a reason to trust the company. In 1977 apple juice sales had quadrupled. Beech-Nut decided to sign a contract with an apple concentrate supplier called Universal Juice Co., which sold its product 25 perecent below market. Being a part of this contract Beech-Nut sales from the concentrated product they saved millions of dollars by using Universal. Beech-Nut’s director of research warned senior management of the problems with concerntrated juice. In 1982 proof came in from a private investigator hired by the Apple Processors Trade Association to investigate claims of adulterated concentrate. They found that the company was not just adding sweeteners to their mix, they were failing to add the apples altogether. Documents found revealed that the so-called apple juice was in fact nothing but water, sugars, flavoring, and coloring.  Instead of immediately recalling all of the products made from the synthetic concentrate Beech-Nut began shipping the tainted juice out of the country. FDA officials threatened a seizure unless the company issued a voluntary recall. Beech-Nut finally issued the recall in November 1982, but by that time all but 20,000 cases of juice had been distributed overseas. In 1986, a federal grand jury found that there was sufficient evidence to indict both Beech-Nut and two top executives on 470 counts of violating the Federal Food Drug, and Cosmetic Act. Beech-Nut pleaded quilty to 215 counts of indictment and was fined a record $2 million. the indictments of the company in 1986, long after all bogus juice had been removed from grocery store shelves, that the scandal began to impact sales. The intense publicity that surrounded the trial and sentencing, however, was disastrous for the company.