Business Policy

Ben & Jerry’s Homemade Ice Cream

Inc.: A Period of Transition
Case Analysis

Aqsa Tabish, Hammad Zahid, Jahandad Akram, Maheen Siraj,

Sana Zafar.
2-8-2018
 Introduction

Ben and Jerry’s was founded in 1977 by Ben Cohen and Jerry Greenfield. Ben & Jerry’s rose to
success after first opening shop at a local gas station. They invested $12,000 in their first shop in
an old gas station in Burlington and Vermont. As a producer of super premium ice cream, they
became famous for ‘mix in’ flavors like Cherry Garcia and Chunky Monkey. After Ben resigned
from the position of CEO, Bob Holland was made the new CEO. Ben and Jerry’s grew from a
small ice cream shop to a medium sized company in 1980’s and had sales about $150 million.
Competition intensified in the industry and the growth of Ben and Jerry’s began to slow down.
The competitors of Ben and Jerry’s are; Haagen-Dazs, Dreyer’s Grand and Breyer’s. The
competition in super premium segments focused on the quality, flavor differentiation and
marketing rather than prices. The market was divided into two sub segments one was traditional
smooth flavors like vanilla, chocolate, coffee and chocolate chips and the other was mix in flavors
which consisted of base ice cream of chocolate and vanilla in which they added chunks of candy
bars, cookies nuts and fruits.

Qualitative data:

1. Sales were about $150 million in 1980s.

2. Initial investment was $12,000.
3. Currently employ 600 people.
4. In 1994, retail value from ice cream sales was around $10.5 billion.
5. Of the 1.5 billion gallons of frozen desserts produced in US in 1994, 15% was sold in bulk
to retail shops, 25% was in frozen desserts on sticks and 50% was made for home
consumption.
6. 98% of households ate ice cream.
7. Summers constituted 30% of the annual consumption.
8. Supermarket ice cream inventories turned 35 times per year and generated 5 times more
profit.
9. The content of butterfat varied from 17% to 5%.
10. The super-premium segment had 13% of total market in1994.
11. The view regarding the affordability of luxury goods led to increased volumes of super-
premium ice cream to 14% in 1980’s which were 7 times more than average consumer
products.
12. From 1993 to 1994 demand for water ices and sherbet grew to 9.9% and 7.8% respectively.
13. Super-premium segments growth slowed in 1994 to 4% while the premium segments was
up to 11%.
14. The market share of Haagen-Dazs was below 50%.
15. Dreyer’s Grand had 11% market share.
16. Breyer’s had 12% of premium market.
17. Ben and Jerry’s had 43% of market share.
18. Chocolate fudge brownie, Rainforest Crunch and including new flavors contributed to 24%
volume.
19. Chocolate chip cookie dough contributed to 20% of sales.
20. Ben and Jerry’s new “smooth, no chunks” ice cream line captured 6% market share in first
year.
21. 1994 Ben and Jerry’s outperformed Haagen-Dazs with 34% increase in sales.
22. 60% of ice cream were produced by Ben and Jerry’s in 1994 while Dreyer’s produced the
rest at their plant in Indiana.
23. Springfield plant produced about 1.2 million dozen novelties and 2.3 gallons of bulk ice
cream and frozen yogurt in 1994.
24. The new plant costed $40 million and had capacity of 12 million gallons of packaged pints
per years.
25. The sales through Dreyer’s accounted for 52%.

Qualitative data:

1. The competition in ice cream industry grew exponentially.

2. Ben and Jerry’s had a reputation for unconventional “mix-in” flavors as their best sellers.
3. In 1990’s the trend towards heathier eating started to hurt the ice cream market and paved
way for frozen yogurts and sherbets.
4. When Ben and Jerry’s growth slowed down, the stock price took a hit as well.
5. The program for selection of CEO was called “Yo, I’m your CEO” and received about
22,000 entries along with a lot of attention.
6. In December 1994 the company announced its first quarterly loss.
7. Consumption was highest among families with young children and people over 45 years
of age.
8. Ice cream is given to children as a reward and as an indulgence for adults.
9. Ice cream industry divided into local and regional companies, along with the increasing
number of multinational companies.
10. The ice cream making process took 6 hours. The process started from heating, pressurizing,
freezing, aerating, mixing, filling and lastly hardening.
11. Super-premium ice cream was distinguished from other ice creams because it had higher
fat content and low level of overrun.
12. The companies competing in the super-premium segment focused on quality, flavor and
marketing rather than price.
13. In 1980’s companies began to capitalize on marketing research which showed that people
valued quality over price.
14. Ice cream consumers are loyal to particular flavors and to brands too.
15. In 1990’s lower fat content desserts became popular among the consumers.
16. The down home Vermont image of Ben and Jerry’s packaging and logo made it an iconic
brand.
17. Ben and Jerry’s added new flavors as they eliminated slower moving flavors.
18. They didn’t use any formal market research or test market procedures, they relied on the
founder’s ideas and tastes.
19. Ben and Jerry’s introduced super-premium frozen yogurt in 1992 which became very
popular.
20. In 1994 their flavors grew to 44, including ice cream and frozen yogurt variants.
21. Ben and Jerry’s didn’t spend any money on advertising.
22. Tour of Waterbury plant became popular and attracted tourists in Vermont.
 Problems:

1. New companies were entering this category.

2. The first quarterly loss in 1994 and a $6.8 million write down.
3. As premium ice creams were growing at 11%, the growth for super-premium segment
went down to 4%.
4. Super premium segment had 13% market share, which included 2 large competitors
with 93% of market shares.
5. Outsourcing the manufacturing capacity to Dreyer’s.
6. Debt to equity ratio was maintained. Ben Cohen and Jerry Greenfield held 15% and
3% of company’s equity. The company never issued dividends and preferred to
reinvest.
7. Same prices for smooth and mix in flavors, even though the production cost of both
categories differed.
8. They distributed through Dreyer’s; who was their competitor.
9. They focused on high fat content category which was known as super premium and
ignored low fat category when the trend was emerging.
10. Adding more flavors lead to operational ineffectiveness.
11. Ben and Jerry’s blamed for exploitation of resources for financial gain.

Recommendations:

 Firstly, they require restructuring of their distribution channels because as of now they face
a lot of problems because of a weak distribution network.
 Building brand equity is of utmost importance in the super premium segment so more
efforts required on that front.
 Since the market in United States was becoming stagnant, they should expand into other
markets which show potential. Asia can be a viable option because of its growth in
infrastructure over the years and the increased buying power of residents.
 Shift focus from retail outlets to supermarkets because they were 5 times more profitable.
 Think of how they want to position themselves and then choose the flavors they want to
continue producing so they can be more operationally effective. Also, incorporating new
technology in the production process can also cut down on costs and lead times.
 To counter multinational companies like Unilever and Nestle entering this market, Ben &
Jerry’s must come up with a strong marketing campaign to stay competitive and relevant.
 Lastly, the new CEO should stick to a long term plan and not just go with the flow. Have
a keen eye on changing trends and then act accordingly. Identifying changes in the market
is crucial to Holland’s success as CEO.