Ben and Jerry's Homemade Ice Cream Inc.: A Period of Transition

Ben and Jerry’s Homemade Ice Cream Inc.

A Period of Transition

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Ben and Jerry's Homemade Ice Cream Inc.: A Period of Transition

The US Ice cream industry

• Total market size was of $10.5 Billion
• 1.5 Gallons of frozen desert were produced each year.

Of which 25% sold was sold in bulk, 25% was sold as novelty items and the remaining 50% was sold for home consumption.

• 98% of all households consumed ice cream.
• Ice cream was not termed as a seasonal product.
• There were 4 categories of ice cream based on the butterfat content

Market share in brackets

1. Economy – 10%
2. Regular – 35%
3. Premium – 42%
4. Super Premium – 13%

Production processes

6 hours long

Pasteurising->Homogenising->Freezing->Aerating->mixing->filling->Hardening

1. What issues does Bob Holland face as he takes over as CEO of Ben and Jerry’s?

Bob Holland had the following issues as he took over as the CEO of Ben & Jerry’s:

• First quarterly loss in 1994 due to $6.8mn write-down.
• Growth in super premium segment has fallen down to 4% but premium segment was growing at 11%. Ben and Jerry’s core product was super premium ice-cream
• Consumers were becoming more health and value conscious.
• Super premium segment having just 13% of the market had 2 large competitors with no more scope to grow as they both controlled 93% of the market.
• Outsourcing of 40% of the manufacturing capacity to Dreyer’s is very much vulnerable to Ben & Jerry’s.
• Having 52% of the sale distribution through Dryer’s, who is a competitor is bad in the long term.
• High focus on high fat content super-premium category & limited presence in the low fat category.
• Operational inefficiencies due to complexity created by a large no of product variants 44+.
• Conservative debt to equity ratio was maintained.
• Same selling price charged for both the smooth and mix-in flavors although significant variation in the production cost.
• Ingredients were sourced as a social cause from various regions, but Ben & Jerry’s was blamed as exploiting the resources for its financial gains
• Launch of  “Smooth” line of ice creams as head-on to the market leader just because Ben was tired of chewing Mix-ins.

2. What should he do?

1. As we all know that various market giants are looking to enter the ice cream industry such as Unilever and Nestle. They are getting more aggressive about this business thus a company like Ben & Jerry's could really use a very strong marketing and sales guy to be competitive player in the market.

1. In spite of the various players in the market they are having the first mover advantage in the previous times. At the present also they should target the market with the new flavors of ice cream developed by them, because on a whole competing the companies having deep pockets in the existing domain of market will not be easy for them.  Market was fragmented with no unifying force. Many regions had a host of local and regional companies. This will cater to everyone’s taste buds and increase sales.

1. With the help of cost cutting in the term of the wages and work force volume they could increase the duration of their existence, but should ensure that during this course of time they should work out something to increase the market share or else they are bound to fail.

1. The case clearly states that ice cream sales in supermarkets were five times more profitable per square feet compared to other goods. Ben and Jerry could buy refrigeration space and place these in strategic locations in supermarkets to improve sales.

1. Since, United States market was saturated and it seems that Latin America and Asian market is going to see a boom as population as well as per capita income is increasing. They can go for establishing the production unit their or could export their finished goods. This will give them an emerging market as well as they could easily attain an economy of scales.

1. Other factors that affected Ben and Jerry were their poor distribution networks, lack of advertising and R&D expenditure. The ice cream production was complicated and took 6 hours. Investing in the process to reduce production time will greatly benefit the company. Last but not the least in order to survive in global markets advertising is necessary. It keeps people informed about products, increases market share and creates brand value.

1. They can work upon brand building because that will lead to loyal customers and growth in revenues.

1. They can work upon the restructuring of the distribution channels.

3. How does the concept of strategy help him decide what to do?

The strategy of any company answers two basic questions: Where do we compete and how do we compete. It has to be simple as well as ensure consistency with the firm’s resources and capabilities and its external environment.