The New Years Eve Crisis On June 30, 2012 Indian Institute of Management, Ahmedabad Letter of Transmittal To Mr.

Mike Valenti Michaels Homestyle Pasta June 30, 2012 Dear Mr Valenti, Subject: Decision report on how to handle the situation of salmonella contamination in seafoodstuffed pasta shells that have already reached the restaurants. This is in reference to your request for a report on the different options available to handle the situation of salmonella contamination in seafood-stuffed pasta shells and their implications. I am attaching herewith, an analysis that reviews the current situation, and lists down the options available, finally recommending a decision based on the relevant criterion, along with an action plan. I recommend that you inform the restaurant chain about the potential contamination, asking them to go ahead and serve the pasta products but only after making sure that the temperature standards are followed. EXECUTIVE SUMMARY Mike Valenti finds out that Southern Pasta Company shipped seafood-stuffed pasta that was tainted with Salmonella. Mike must decide on how to handle this problem. He can choose to not inform the restaurant chain about the potential contamination. Or he could inform the restaurant chain owner, and go for an official recall, or explain to him the situation and expect a favourable response. The evaluation of options has been based on ensuring minimum financial and goodwill loss, feasibility of implementation and avoidance of an FDA issue. It is recommended that the restaurant chain is informed, and convinced to serve the pasta products after ensuring strict adherence to the temperature standards. [No. of Words : 110] TABLE OF CONTENTS Executive Summary...3 Situational Analysis5 The Problem .7 The Options.7 Criteria for Evaluation..7 Evaluation of Options7 The Recommendation.. 8 Action Plan ..9 SITUATIONAL ANALYSIS

Michaels Homestyle Pasta acquired Southern Pasta Company, which was the only company that produced stuffed shells similar to MHP on a large scale. It was also supplying stuffed pasta shells with identifiable chunks of seafood to restaurant chains. However, the pasta products in SPC were handmade by employees. After SPC had to recall its seafood-stuffed shells due to pasta contamination, its owner, Friedrich Walz, had been willing to sell the company. You negotiated and finally acquired the company. However, you had been facing difficulties in merging the cultures of the two companies. The revelation of potential salmonella contamination to already shipped pasta came as a rude shock to you. Salmonella is an extremely harmful bacterium that thrives in undercooked food containing eggs, poultry or meat, and is particularly harmful to small children, the elderly, and people with weakened immune system. You have limited options at your disposal at this point of time. You can inform the restaurant chains about the potential contamination and go for an official recall. This would ensure that the contaminated pasta doesnt reach the consumer and the FDA and health departments do not get involved. According to MHPs lawyer, the restaurant chain is responsible for cooking the pasta to a temperature above 160 degrees, which would eliminate the contamination. Hence, they would be equally at fault in case of a mishap. You could trust the chains cooking standards to ensure a healthy product is delivered to consumers. Or you could contact the chain and notify them to make sure the cooking temperature was regulated. However, there are ramifications to each of the options. Since this would be the second such incident in the history of SPC, the consumers might go to another vendor. In case of loss in goodwill, the restaurants might take the companys products off the menu altogether. This could mean a loss of at least 50 per cent revenue stream to you and a huge loss on the investment made in buying SPC. In case the FDA gets involved, the entire company could be forced shut. A decision has to be taken in regard to the current situation, and a necessary course of action needs to be decided that would ensure minimum damage to the company. THE PROBLEM How should you handle the situation of potential salmonella contamination in seafood-stuffed pasta shells that have already reached the restaurants? THE OPTIONS In the current situation, you have the following options: 1. Not informing the restaurant chain about the contamination 2. Informing the restaurant chain about the contamination On deciding to inform the customer, you would have the following options: a. Official recall of the entire batch of salmonella-contaminated pasta b. Convincing the restaurant-chain owner to serve the pasta products after ensuring strict adherence to the temperature standards. CRITERIA FOR EVALUATION 1. Minimum loss of reputation and goodwill 2. Minimum monetary loss 3. Feasibility of implementation 4. Avoidance of an FDA issue EVALUATION OF OPTIONS Option 1 Not informing the customer about the potentially contaminated pasta would mean that the pasta would be served as usual in the restaurants. If all the restaurants follow the temperature guidelines, there is a high chance that no one would fall sick and Southern Pasta Company would be saved from any kind of embarrassment. There would be no harm to the companys reputation as well as the revenue stream. However, if in case even a single case of food poisoning is reported owing to consumption of salmonella-contaminated pasta product, there could be serious implications. The FDA would have to take legal action against Southern Pasta Company, probably forcing it shut. Option 2 Informing the customer about the potential contamination would be the right thing to do from an ethical standpoint. You should personally talk to the restaurant-chain owner and tell him about the entire situation. There are two ways in which you can handle this conversation with the restaurant

chain owner. Option 2a You could ask for an official recall of the entire batch of seafood-stuffed pasta products. This would ensure that the contaminated pasta would not be served and consumed, and hence, from health standpoint, no one would be affected. But unavailability of the specialised pasta products would put the restaurant chain in a tight spot on New Years Eve. The occurrence of this event for a second time could hamper the relationship between you and the restaurant chain owner. There is a possibility that they would look for another vendor to get these products. Hence the huge investment made in buying SPC would go to waste. Option 2b It is important that you handle the current situation with utmost care. In your conversation with the restaurant chain owner, do explain how you got to know about the potential contamination just a few hours ago. You should explain how the previous owner of SP ordered his employee to go about the process of covering up the contamination. Then explain to him how if correct cooking procedures are followed the pasta could become uncontaminated and safe for consumption. This would save the faces of both the restaurant chain and SPC in front of the final consumers. FDA would also not get involved as consumers wouldnt be harmed. THE RECOMMENDATION It is recommended that the restaurant chain is informed, and convinced to serve the pasta products after ensuring strict adherence to the temperature standards. ACTION PLAN: 1. Talk to the restaurant chain owner and make him understand the need for his restaurants to follow the temperature standards. 2. You should then get the SPC plant inspected and sanitized off of any infections. 3. You should also send a legal notice to Hans Schmidt for attempting to hide the contamination positive lab results from MHP. 4. In a long-term action plan, you should go in for certification of Food Safety Management Systems such as HACCP. The preventive approach would render your companies respect and trust from all your customers and consumers. [Word Count =992]