The New Years Eve Crisis

Submitted in partial fulfilment of the requirements of the course

Written Analysis and Communication I

Instructor: Prof. Avani Desai

Academic Associate: Mr. Sudhir Pandey

Submitted on June 30, 2012 by

Ankit Bhageria

Section B
June 30, 2012

Mr. Michael Valenti

Michaels Homestyle Pasta
Connecticut

Dear Mr. Valenti,

Subject: Advice regarding the decision on Southern Pasta Salmonella poisoning issue

The enclosed report contains my analysis of the Salmonella poisoning in the recent lot of seafood-

stuffed pasta shells. Based on the potential risk to human life, minimization of financial losses and

preservation of Mikes reputation, I recommend that you initiate a recall of the entire lot of pasta

shells. I have worked out an action plan to implement the recall operation, which is included in the

report.

Sincerely,

Ankit Bhageria

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Executive Summary

Southern Pasta, a company recently acquired by Mikes has delivered pasta shells contaminated with

Salmonella to its largest customer. Mikes needs to decide how to prevent the infection from

reaching the public while minimizing financial losses and damage to its reputation. Mikes can hide

this information from the restaurant chain or even instruct them to pasteurize the food to inactivate

the bacteria. However, any slip-ups can lead to regulatory issues and multi-million dollar lawsuits.

It is recommended that Mikes should initiate a food recall. Although this is a costly option, but it

ensures public safety and garners customer and employee goodwill, which will be beneficial in the

long-term.

* Number of words: 108

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Table of Contents

Situational Analysis ................................................................................................................................. 1

Problem ................................................................................................................................................... 2
Options .................................................................................................................................................... 2
Criteria for Evaluation ............................................................................................................................. 2
Evaluation of Options.............................................................................................................................. 2
Recommendation.................................................................................................................................... 5
Action Plan .............................................................................................................................................. 5
List of References .................................................................................................................................... 6
Exhibits .................................................................................................................................................... 7
Situational Analysis

Michaels Homestyle Pasta, a leading supplier of gourmet stuffed pasta shells, has recently acquired

its arch-competitor, Southern Pasta Company. Mikes faces a corporate nightmare as the recent lot

of seafood stuffed pasta shells shipped out by Southern to a restaurant chain is tainted with

Salmonella. The prior knowledge of the poisoning and the demand spike due to New Year festivities

further aggravates the problem from an ethical and operational standpoint.

The recall costs can be to the tune of $ 0.5 million, which represents almost 2% of the revenues.

There is also an impending risk of losing the restaurant chain, which is the largest customer for

Southern Pasta, as this is not the first occurrence of Salmonella poisoning in Southerns products.

The restaurant chain is valuable to Mikes as it accounts for $ 3.5 million of the $ 8 million revenues

of Southern and is one of the primary reasons for the acquisition. Losing this key client could trigger

a domino effect leading to other restaurant chains terminating business relationships with Mikes.

Since nearly half of Mikes sales were to restaurant chains, this could be detrimental to future

revenues.

The operating procedure requirements set forth by the restaurant chain can eliminate the bacteria.

However, if the infection reaches the public, the situation can quickly manifest into a PR and legal

fiasco for Mikes. This can exact an emotional toll on Mike Valenti, more so when he needs to stay

home for his wifes delivery. Also, Mikes has to ensure that it upholds its ethical integrity and

portrays the image of an organization that regards public safety as sacrosanct. This will be important

to merge the cultures of Mikes and Southern.

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Problem

How should Mikes protect the public from Salmonella poisoning while minimizing its losses and

preventing repeat occurrences in the long-term?

Options

1. Do not inform the restaurant chain.

2. Collaborate with the restaurant chain to eliminate infection by high-temperature cooking.

3. Recall the contaminated lots.

Criteria for Evaluation

I. Ensure public safety

II. Protect corporate reputation

III. Minimize financial losses and retain restaurant chains business

IV. Long term gains

Evaluation of Options

1. Do not inform the restaurant chain

Ensure public safety: A majority of salmonella species can be inactivated if the

restaurant chain operates at documented pasteurization temperatures. However, in

the event of the infection reaching the public, there is a significant morbidity and

mortality rate. Hospitalization and death rates can be as high as 33% and 3%

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 respectively. (Schlundt, 2001) Exhibit 1 shows the number of Salmonella-related

deaths and death rates in the past 10 years.

Protect corporate reputation: Mikes might get away with the wrongdoing if the

contamination does not result in any public-level infection. However, if any case of

infection were to come to light, Mikes will be portrayed by the media as an

unethical and unscrupulous organization which can ruin its reputation.

Minimize financial losses and retain restaurant chains business: The upside to this

option is prevention of losses on the infected food lot. However, in case of any

eventualities, the restaurant chain might pull out. Also, the ensuing litigation costs

and revenue losses due to other customers withdrawing their businesses might run

into millions of dollars.

Long term gains: Mikes will be setting a wrong example to the employees of

Southern, who will never be able to come out of their shells again, like Fred did.

2. Collaborate with the restaurant chain to eliminate infection by high-temperature cooking

Ensure public safety: The infection can be contained by following proper heat

processes. But, it will be difficult for the restaurant chain to notify all its restaurants

in a single day. Even if that is possible, things can still go wrong with demands

peaking due to New Year celebrations and chances of a slip-up are high. Moreover,

heat resistant stereotypes might survive cooking. (Wagner, n.d.)

Protect corporate reputation: This unethical act will destroy the internal reputation

of Mikes management amongst the employees and Mike Valenti will find it difficult

to earn the trust of his new Southern employees. With the chances of the news leak

being high, getting away with the wrongdoing without attracting unwanted publicity

seems improbable.

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 Minimize financial losses and retain restaurant chains business: Mikes can

prevent writing off the contaminated food lot. Also, if the restaurant goes along with

plan due to demand volumes on New Year, there is a high probability of retaining

their business. However, this voluntary act of feeding a contaminated food product

might lead to multi-million dollar lawsuits and even threaten Mikes with a

shutdown. (Cary, 2001; Supreme Beef, 2000)

Long term gains: The decision will garner mistrust and even hate from both Mikes

and Southerns employees. This will make it difficult for the employees to approach

the management in similar situations which might lead to repeat occurrences of

food contamination.

3. Recall the contaminated lots

Ensure public safety: A food recall will ensure that there is a near-zero chance of the

contamination reaching consumer flow. Recall communication efforts have already

been initiated by Mikes employees. The public can be alerted if some lots cannot be

traced, which will further reduce chances of infection.

Protect corporate reputation: If a firm-initiated recall is successful, press releases

might not be required, which will reduce damage to reputation of Mikes.

(Regulatory Procedures, n.d.) In the likely event of the failure of a firm-initiated

recall, reputation loss is inevitable. However, by marketing itself as a company that

values public safety, Mikes can earn customer goodwill and loyalty. This will be

paramount to the organizations sustainability. (Gunther, n.d.)

Minimize financial losses and retain restaurant chains business: The recall will be

associated with significant costs as is evident from the cost borne by Southern

during the previous contamination incident. By minimizing the restaurant chains

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 liability and earning their goodwill, Mikes can not only retain their business but

strengthen the relationship.

Long term gains: By setting a right example and promoting loyalty, welding the

mainstream culture of Mikes with that of Southerns will become easier. This will

encourage employees to readily own up responsibility of future goof-ups.

Recommendation

It is recommended that Mikes should recall the contaminated lots.

Action Plan

1. Recall the contaminated food lots from the restaurant chain and locate leftover lots at

distributor locations.

2. In case of untraceable lots, hold a press release and notify FDA to initiate a full-scale recall.

3. Deploy quality monitoring systems at production facilities and conduct regular audits to

ensure product safety.

4. Hold company-wide meetings to ensure that workers comply with safety norms and

fearlessly bring forward any cases of food contamination.

* Number of words: 1099

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 List of References

1. Cary, Annette. (Feb, 2001). $4.75 million awarded in E. coli case. About E. Coli. Retrieved June 30,

2012, from http://www.about-ecoli.com/ecoli_outbreaks/news/475-million-awarded-in-e-coli-case/

2. Gunther, Craig. (n.d.). The High Cost of Product Recall. Vigilistics, Inc. Retrieved June 30, 2012, from

http://www.vigilistics.com/pdf/The%20Cost%20of%20Product%20Recall.pdf

3. Regulatory Procedures Manual > 7-5 - Initiation of a recall. (n.d.). U.S. Food and Drug Administration.

Retrieved June 30, 2012, from

http://www.fda.gov/ICECI/ComplianceManuals/RegulatoryProceduresManual/ucm177309.htm#SUB

7-5-1

4. Schlundt, David. (Jan, 2001). What are the different types of food poisoning and their subsequent

treatments? Retrieved June 30, 2012, from

http://www.vanderbilt.edu/AnS/psychology/health_psychology/types.htm

5. Supreme Beef Blames USDA "Harassment" for Bankruptcy. (Oct, 2000). Organic Consumers

Association. Retrieved June 30, 2012, from http://www.organicconsumers.org/irrad/supreme.cfm

6. Wagner, Al. (n.d.). Bacterial Food Poisoning. Retrieved June 30, 2012, from http://aggie-

horticulture.tamu.edu/extension/poison.html

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Exhibits

Exhibit 1:

140 0.05

0.045
120
0.04
100 0.035

0.03
80
0.025 No. of
60 Salmonella
0.02 related
deaths
40 0.015
Death rate
0.01 per 100,000
20 people
0.005

0 0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Number of salmonella-related deaths and age-adjusted mortality rates per 100,000 population by

year, United States, 1991-2000

From: Cummins, Patricia. (n.d.). The Burden of Salmonellosis in the United States. Retrieved June 30,

2012, from http://cdn.intechopen.com/pdfs/26420/InTech-

The_burden_of_salmonellosis_in_the_united_states.pdf

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