Mike Valenti, the owner of Michael’s Homestyle Pasta, just acquired the Southern Pasta Company from Friedrich Walz on 10th December for $3 million. The reason why Mike bought Southern pasta Company in the first place was because almost half of revenues was chain accounted form 200 restaurants.

On the Monday morning of New Year’s Eve Mike receives a call from Ted Brewer, VP (Administration and Operations) stating that Fred Jones, Southern quality assurance manager wants to talk to him. “The seafood-stuffed pasta shells that Southern had just shipped to its biggest customer were tainted with salmonella” Fred said.

Mike was horrified as it was the New Year’s Eve, biggest night in the year for restaurants. The two challenges against him was that either, “This major regulatory incident could permanently shut him down” or “ He can wave good-bye to 50% of the revenue stream that he just bought 3 weeks ago”.

Thereafter, Mike sets up a conference call with his management team which includes Dan, Ted & Mark. They were discussing that what would be their defense against such a tragic incident. The pressure from FDA, customers, media etc would be too worst to handle.

After discussion, there were two options. One option would be to trust the chain’s cooking standards. Another option would be to contact the chain and have them notify all restaurants, to make sure that the cooking temperature was high enough.

By now, it was late afternoon and Mike had to figure out what to do as the restaurants would soon be starting to serve their patrons, happily celebrating New Year’s Eve.

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Issues and Challenges On hearing that the delivery of salmonella contaminated pasta to a important client of Southern Pasta Company (SPC) which was recently bought by Michael’s Homestyle Pasta (MHP) just three weeks ago, Mike has to come up with an action plan as he can’t suffer a huge financial losses and also not risking the lives of impeccable customers.

The stuff pasta is a specialty product and with the acquisition of SPC, MHP is the only major player in the market. Thus, the customers were too much dependent on these two companies. The customer dependency is authenticated by the fact that the cline didn’t end contract with SPC after the May 2001 recall incident. So, instead of holding an upper hand over the restaurant chain, Mike has to concern about stuffed pasta being taken off the menu.

Also, there was no food contamination report from the restaurants clients after the May recall incident. But, the quality of food was suspected which is supplied by SPC. So, it was concluded that the restaurants have a hale standard for cooking.

As Mike and his wife were expecting their third child in early January, he was not able to spend time at SPC which was located in Tampa. Thus, he was not able to integrate the culture of two companies. This may be the reason why Jones came forward only 3 weeks when he developed a little trust in the new management. The workers at SPC are used to following orders, ethical or not, and also used to work under authorities management. So whatever decision is to been taken has to solve the contaminated batch issue as well as focus the basic problem of clash of the cultures.

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Statement of Objective: What action plan would be accordant with MHP’s working culture and lead to minimum financial, legal and fame risk for Mike Valenti and his company?

The Options:
1. Do not call the restaurant clients and trust their cooking standards.
2. Call the clients and tell them about the contamination so that proper cooking standards can be conserve.

Criteria for Evaluation:
• The reputation of the company
• Financial Implications
1. Short term: Losses of contaminated batches of Salmonella
2. Long term: Losing their major client.
• Legal Implications
• Righteous and social responsibility towards the clients and as well as consumers.

Evaluation of Options:
1. Call the Clients

Letting the clients know about the contamination would give them a head start to make sure that they cook the pasta as per the norms. But on the other side, the restaurant clients may not use the contamination batch as can ask for the refund. There can be possibility that the client may remove pasta

3 from their menu and look for another supplier. But since the clients did not switch from SPC after May’01 incident, it can be assume that the restaurants don’t have other good suppliers. Also, there won’t be any legal implications in this options. But, however the reputation of Mike and his company was on the line. Also the FDA will have minimal intervention as it is a business to business service. Also the possibility of spreading the news in local media about the contamination but this would not do any long term damage to restaurants and SPC’s reputation.

2. Don’t call the Clients As it is the New Year’s Eve, the sales would be at peak for the restaurants. It would be only traditionalistic to assume that the dishes might not get properly cooked in spite of hale standards, due to high rush. Thus, there won’t be any outbreak given the restaurants serving contaminated pasta. In case of no outbreak, there are no financial loses, legal or reputation risk to be looked at. But in case of outbreak, SPC has to share the responsibility with the restaurants.

The short term financial loss would be paying a settlement amount in case of lawsuit. The long term loss could be losing a huge client. And worst case scenario would be, if client discovers that Mike didn’t inform them even after having knowledge of contamination, they will terminate their contract with SPC.

As the Lawyer stated that, Legally Mike has limited liability and if anyone suffers due to the contamination, the liability can be placed to previous owner. But on the contrary, if anyone testifies against Mike, that he was having knowledge of contamination, he can face serious legal action. Also the reputation will be blemish.

4 Also, not informing the client would impact Mike‘s effort to bring MHP’s culture into SPC. It would send signal to Jones and other possibly aware about the situation that Mike is no different from their previous owner. Mike would never get the same admiration from SPC’s employees and this will find it difficult to develop a similar healthy working environment.

Recommendation: Based on the evaluation of the two options, Mike should call the clients about the Salmonella contamination. There is financial risk in both the options but Mike’s principles should outweigh other implications. Also, he has been trying hard to integrate the culture of both the companies is served by calling the clients.

Action Plan:
1. As time is running out, he should immediately call the restaurant clients before the restaurants starts serving the food.
2. Tell the client how this was bought to Mike’s attention in such a short notice and guarantee them that proper checks would be install form now on.
3. Check for any contaminated batch in storage and destroy the same.
4. As to avoid complete shutdown of SPC, Mike will be looking at the possible causes of contamination and mechanize the process in MHP.