Sauce

PASTA PERFECT INC.

By Joan Winn and John W. Mullins, University of Denver. This case was originally presented at the North American Case Research Association Annual Conference in New Orleans, November 1994. This case is intended for use as the basis for class discussion rather than to illustrate the effective or ineffective handling of a managerial situation. All events and individuals in this case are real, but names and locations have been disguised.

"This is a tough call," said Jim Leonard, Director of Pasta Perfect, Inc., to Tom Walker, President of Pasta Perfect. "Clearly, our results in the retail stores are not what we'd like them to be, and that concerns me a great deal. On the other hand, I'm not sure we have what it takes to succeed in supermarkets, and to put our funds there is not what we told the shareholders we would do with their money when we raised the last round of capital." It was October 1988, and the Pasta Perfect board was discussing a change in strategy, from development of a chain of specialty retail shops, to selling fresh pasta and sauces through supermarkets. Pasta Perfect, headquartered in St. Louis, Missouri, operated 14 fresh pasta shops in the St. Louis and Chicago metropolitan areas. In spite of its rapid growth, however, the company had not reached profitability. While everyone in the small company was frustrated over the firm's poor performance, no-one felt the frustration more acutely than did Tom Walker. It was he who had conceived the idea of a chain of fresh pasta stores. It was he who had put together a management team and recruited a board of directors, including Jim Leonard, a venture capitalist. And it was Tom Walker who had convinced investors to put up several rounds of capital to build the business. Now it appeared that these investors, who included friends and family as well as almost 7,000 shareholders in the now publicly held firm, were at risk of losing their entire investment in Pasta Perfect. To Tom, it was clear...