Thea Delicia #29504107

Ben & Jerrys case

Ben & Jerrys was competing in the superpremium ice cream and frozen yogurt market, which was highly competitive. The largest competitor for Ben & Jerrys was HaagenDasz Company, Inc, which penetrated the market earlier than Ben & Jerrys and already became well established in certain markets. That head start may contribute to its large share market, 62 percent, in 1993. However, Ben & Jerrys market share rose significantly while that of Haagen-Dasz kept decreasing. This resulted in both companies shared approximately 42 percent of the market share by the beginning of 1995. This amazing growth was generated by Ben & Jerrys great innovation and unique approach to sell their products. It focused on consistently producing new flavors while maintaining a very high quality of its products. It also created new product line, such as smooth ice cream, frozen yogurt, peace pops and quart-sized ice creams. However, Ben & Jerrys most notable competitive advantage might be their marketing strategy. Its unconventional yet socially- conscious operation gained them free publicity. Not only did they save millions of dollars in advertising, they also established product differentiation and created good branding to its customers. However, Ben & Jerrys was facing a big problem as the market changed. The demand for its premium-priced ice creams was decreasing since customers demand moved toward the less costly ones. Price competition also became common in the superpremium segment. As the company got bigger, Ben had some difficulties in running the company because of his lack of expertise in management. With the decreasing sales, the new plant in St. Albans was expected to have lots of idle capacity. To maintain its growth, Ben & Jerrys was focusing on its restaurant sales and it paid little attention to markets outside of the US. On the other hand, Haagen-Dasz focused on ice cream exports, whose market in the US tripled at that time. All of these factors summed up into decreasing profitability. In 1993, they were made profit of $7.2 millions while in 1994 they lost $1.86 million. Looking at its current and quick ratio, Ben & Jerrys was still liquid and thus still able to meet its short-term obligations. Looking at the D/E ratio that increased from 0.43 to 0.66, it seemed that the company relied heavily on debt to finance its operation. Even though the D/E ratio rose significantly, sales only grew by 6% and net income was falling. It meant that the cost of financing exceeded its benefits and the interest obligation will become a burden to the company and might also cause bankruptcy if not properly taken care off. Debt/CF level also escalated since companys cash flow is negative while the debt level kept increasing. Accounts payable turnover decreased from 8.3 to 7.8, meaning that it took Ben & Jerrys longer to pay off its suppliers. As Holland, I would at first focus on operation. Ben & Jerrys operation was laborintensive and their machines were inefficient. In order to survive, they had to be more efficient even though it is at the expense of letting go some of the employees. I would also focus on penetrating the markets outside the US, which offer a great potential. Marketing should focus not only to cause-conscious ad, but also to advertise its products by coupons or discounts in order to survive the price competition. If necessary, company should renegotiate employees benefits with their union to cut on its expenses. At the status quo, the benefits are well above the industry standard. It can be cut down to the level that was still above the standard but still economically feasible for the company. When the survival of the company is compromised, employees morale will also be affected. One alternative to alleviate this problem is to offer stock options. Ben & Jerrys has been criticized for only offering employees less than half percent of its company stock. Offering stock options would solve this problem and it would also encourage employees to perform better so that the company can survive.

1994

1993

Financial performance
Liquidity measures Current ratio Quick ratio Leverage Long term D/E D/E Debt/CF A/P turnover A/R turnover Profitability =current assets/current liabilities =(current assets-inventories)/current liabilites 3.588940923 3.239063333 2.658403213 2.210721617

(assuming all sales are on credit)

0.447140169 0.659196594 25.58516274 7.887906638 12.4992818 -1868000

0.242411669 0.432226315 4.458079167 8.303486851 12.01518389 7200000

Market performance
Market share Sales growth 42% 6% 36% 6.33%