Ben & Jerry's Introduction

The ice cream industry

The ice cream industry was at an all-time high in 1994 with the per capita consumption of 24.1 quarts which equates roughly to $10.5 billion. This was due to the fact that ice cream was no longer considered a frivolous affair, but was instead considered as an indulgence for adults and as a treat for children.  An affordable luxury, ice cream was consumed by around 90% of all households in the United States and in all seasons, not just the warm summer months. In fact, summer months accounted for only 30% of all the ice-cream sold per year.

The ice cream market was broken down into a number of segments on the basis of the butterfat content. At one end of the spectrum were superpremium brands with butterfat content as high as 17%, and on the other end of the spectrum were frozen yogurt brands with butterfat content as low as 5%. Moreover, due to the increased demand of ice cream, the ice cream industry was also fragmented by a variety of players ranging from local, regional and multinational brands.

The Superpremium Ice Cream market

The superpremium ice-cream market was characterized by higher fat content and lower level air (overrun). It was divided into two sub segments; traditional “smooth” flavors and “mix-in” flavors. Haagen-Dazs dominated the smooth flavors, market whereas Ben & jerry’s dominated the latter. The superpremium market consisted of brands that were twice the price per ounce of brands in the premium market, whereas the premium ice-creams were three to four times the price of regular ice-creams. However, owing to the large cost of production of mix-in flavors with the price being identical, Ben & Jerry’s profits in this segment were lower than those of Haagen-Dazs.

Moreover, in the superpremium market, product quality, flavor section, shelf space and product distribution wee important in gaining market share. These were, therefore, the major focus of the players in this market.

In the early 1990s, lower fat desserts became increasingly popular which further segmented the market. However, by mid 1990s, the competition became increasingly intense. The consumers became increasingly price sensitive and preferences shifted from superpremium brands to premium and regular brands. Resultantly, the growth in the superpremium and premium segment slowed down. This coupled with the fact that the ice cream industry as a whole spent very little on advertising ( $25 million in 1993 and $32 million in 1994) meant that the industry was in a sensitive state.