A. SUMMARY/OVERVIEW
Ben & Jerry’s Homemade, Inc., the Vermont-based manufacturer of ice cream, frozen yogurt and sorbet, was founded in 1978 in a renovated gas station in Burlington, Vermont, by childhood friends Ben Cohen and Jerry Greenfield. They started producing their interesting ice cream blends, with catchy flavour names, and chunky ingredients, and had an anti-corporate style that ensured they constantly contribute to various social matters throughout the world. They did this via monetary contributions, and at other times through creative co-op arrangements (sourcing nuts from South American rain forests where nut harvesting would offer a renewable alternative to strip-cutting the land for wood products). Ben & Jerry’s competed in the superpremium ice cream market which was dominated by such household names as Häagen-Dazs. Superpremium ice cream differentiated itself with its high butterfat content and low overrun (low ratio of air to ice cream in the finished product) which is what gives it its rich taste. Ben & Jerry’s has in recent years been mulling over the idea of seriously putting in a full effort to try and enter a foreign market to increase sales and profits. An opportunity has risen for them to enter the Japanese market, however, they are faced with the decision of how to enter it. They have to decide whether to penetrate through Seven-Eleven’s 7,000 stores in Japan or to give the go-ahead to Ken Yamada, a prospective licensee who would manage the Japan market for Ben & Jerry’s.
B. COMPANY/ORGANIZATION POSITION
i. Vision/Mission
Vision: No formal vision stated.
Mission: No formal mission stated found in the case booklet, however, the following statements were found on the company’s website.
Product Mission
To make, distribute & sell the finest quality all natural ice cream & euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment.
Economic Mission
To operate the Company on a sustainable financial basis of profitable growth, increasing value for our stakeholders & expanding opportunities for development and career growth for our employees.
Social Mission
To operate the company in a way that actively recognizes the central role that business plays in society by initiating innovative ways to improve the quality of life locally, nationally & internationally.
Central To The Mission Of Ben & Jerry’s is the belief that all three parts must thrive equally in a manner that commands deep respect for individuals in and outside the company and supports the communities of which they are a part.
ii. Goals/ Objectives
Goals: No formal goals stated, however, they want to stay true to their original idea of contributing 7.5% of pre-tax profits to various social causes throughout the world.
Objectives: No formal objectives stated. However, some potential objectives could be:
• Introduce ice cream to Japanese market in time for the summer 1998 ice cream season.
• Make a market penetration decision by autumn, 1997.
iii. Past and Current Strategies
Past
Corporate
• Combination of anti-corporate style, high fat content of the ice cream, the addition of chunky ingredients and catchy flavour names like Cherry Garcia, created an initial following.
• Took the company public to Vermont stockholders in 1984, later registering with the Securities and Exchange Commission (SEC) for nationwide sale of stock.
• Ben & Jerry’s policy was that the highest paid employee would not be paid more than seven times what the lowest-paid worker earned.
• The company launched a highly publicized search for a CEO, inviting would-be CEO\'s to submit a 100-word essay explaining why they would like the job.
• Another Ben & Jerry’s policy allowed each employee to make up his/her own job title (ie. person who might have been called the public relations manager took the title of “Info Queen”).
Competitive
• Exceptionally rich ice cream with at least 12% butterfat, compared to 6-10% for other brands gave the Ben & Jerry’s brand a better, richer taste.
• Very dense ice cream – low ratio of air to ice cream in finished product. Richness and density (low overrun) qualified Ben & Jerry’s as a superpremium brand.
• In 1985 the company bought a second production plant nearby Springfield, Vermont. A third plant was later built in St Albans, Vermont.
• In May of 1979, Ben & Jerry held the first Free Cone Day. They scooped free ice cream, all day, to everyone who stopped by.
Business
• Free advertising through press coverage of its founders’ antics and social interest causes.
• Entering new markets without well established marketing plans (proved to not be successful).
Current
Corporate
• Realizing the need to “go corporate” and hiring an accredited CEO with business, consulting, and managerial experience.
• Highlighting its community roots, Ben & Jerry’s would buy its cream only from Vermont dairies.
Business
• Realizing that they need an effective, thought out marketing plan to enter a new, foreign market.
Competitive
• Selling product through strategically placed scoop shops across the U.S.
• Ben & Jerry’s gives 7.5% of pre-tax profits to social causes like Healing Our Mother Earth, which protected community members from local health risks, and the Centre for Better Living, which assisted the homeless.
C. ENVIRONMENTAL [EXTERNAL] ANALYSIS
i. MEGA REVIEW [include PEST analysis, nothing relevant industry specific and general economic trends
Political
Many countries have various tariffs regarding the import of ice cream into a country. Each country will also have differing labour, manufacturing and packaging laws. Many will have regulations concerning the need for middlemen in an importing equation, and others will also have import quotas that need to be met for ongoing ties to continue. Many companies are able to get by such regulations by dealing with the distributor directly.
Economic
Ice cream is considered a normal good. Statistical evidence indicates that ice cream consumption increases with income and education. Currently (1997) Japan’s economy is contracting, which means that consumption of ice cream has the potential to decline if the economy continues to shrink. Along with this, the currency will also lose value, making it tougher for increased profit margins to exist.
Socio-cultural
In U.S, consumption of ice cream is considered a desert, and as such, the sale of larger sized containers of ice cream is possible and profitable. However, in Japan, ice cream is considered more of a snack. Most sales of ice cream are through personal size containers (approximately 120mL, compared to Ben & Jerry’s and Häagen-Dazs’ regular 500mL containers). The Japanese market consumes lots of ice cream (2nd largest ice cream market in the world at $4.5 billion in 1995).
Japan has different taste preferences that the U.S. Japan prefers ice cream to not be as sweet, and manufacturers would have to replace “vegetable gum” ingredient with “protein solids”.
Technology
Certain advances in technology (ie refrigerated containers) allows for the shipping of ice cream into new markets as opposed to “setting up shop” in each foreign market and manufacturing the product there. Advanced manufacturing equipment allows for mass production in an efficient manner, which may lead to effective economies of scale. Also, advances in technology allowed for environmentally safe packaging.
ii. MACRO – Industry Overview & Market Share Analysis
In the ice cream industry, there are considerable economies of scale effecting overall profits.
The ice cream industry is a large industry in the U.S. totalling at $3.34 Billion in 96-97. B&J holds approximately 3.6% of this market. Major players in the general ice cream industry include Dreyer’s (owned in part by the Swiss food giant Nestlé and branded Edy’s on the East Coast), Breyer’s (a unit of the Dutch-English firm Unilever), Blue Bell, Häagen-Dazs, Healthy Choice Premium (owned by agribusiness and consumer food firm ConAgra), Starbucks (one of Dreyer’s brands), and private-label products/economy brands.
**Refer to Appendix 1-A for detailed info of market share.
Superpremium ice cream, is the market which Ben & Jerry’s considers itself to be competing in. In supermarkets alone this industry is worth $361 Million. This market is less fragmented, with Häagen-Dazs holding 44% and Ben & Jerry’s near by holding 34%. Other players in this market include Starbucks, Healthy Choice, Breyer’s Blend, Colombo, Portofino, and other small brands. **Refer to Appendix 1-B for detailed market share breakdown.
In Japan, however, the market was much more complex in terms of what Ben & Jerry’s was after. The Japanese market for ice cream is the 2nd largest in the world at $4.5 Billion in 1995. There are at least six Japanese ice cream manufacturers already producing and selling superpremium ice cream in Japan.
**Refer to Appendix 1-C for Japanese superpremium market breakdown.
iii. MACRO (Industry) REVIEW of competitiveness, using Porter’s 5 Forces Analysis
[How each of the “5 Forces” affects competitiveness – ON THEIR OWN and COLLECTIVELY – define the industry]
1] Intensity of rivalry [for ex: strong/weak… on what is rivalry based?]
Rivalry in the ice cream industry is strong. Each major competitor is constantly fighting for extra market share. In Japan, there are at least six known superpremium ice cream manufacturers.
Competing firms are constantly trying to differentiate themselves to gain larger portions of market share. There is a need to keep up-to-date with consumer preferences regarding taste.
The strength of this force increases competition in the industry
2] Barriers to Entry / Threat of New Entrants
Nearly anyone with enough capital may enter the ice cream market, however, a manufacturer needs to have capital and a substantially proficient product along with established distribution channels. Larger companies will have exclusive rights set up with major supermarket and convenience chains, thus leaving minimal shelf space for newcomers.
Japan is known to have a highly complex distribution system driven by manufacturers, its barriers and tariffs to foreign products are high, and the distance for shipping frozen products is immense. This makes the barriers to entry high, and threat of new entrants low. There are ways to get around the regulations imposed by the industry. One such way to bypass all this is to hook up directly with a distributor (ie. Seven-Eleven)
These forces decrease the competition in the industry.
3] Substitute Products [availability of extra-industry substitutes]
There are many substitute products on the market. Such substitutes include virtually anything that can be consumed as a snack (in Japan) or a desert (in U.S.). Considering the fact that ice cream may be consumed either as a snack or as a desert, some examples of substitutes can be anything from an apple (or any fruit), to a candy bar, to crackers, a slice of pie, rice cake, baked goods, chips, etc, and the list can go on and on.
The fact that there are so many substitutes available to ice cream, this increases competition in the industry.
4] Power of Supplier [what is being supplied to industry by whom and how readily available]
As with any dietary good, manufacturers will typically want to stay with one supplier, as such perishable raw materials as eggs, egg yolks, cream, and milk need to be consistent and high in quality in order to produce a quality product. Furthermore, manufacturers and suppliers will also typically have prescheduled shipment/delivery dates and schedules, which would make switching a little bit difficult. However, in a “worst case scenario”, switching costs between suppliers would not be a huge tragedy. There would probably be a little bit of a period where there would be some problems, but all in all, switching suppliers can be done.
The half and half impact of this force does not really have much of an impact on competitiveness in the industry.
5] Power of Customers [who/what are customers – are they “powerful” – to what extent?]
Customers certainly have a lot of power in this industry. Customers are virtually anyone who wishes to purchase ice cream. There certainly isn’t much loyalty in this industry, as a typical customer will purchase the ice cream brand, which is most convenient, or which best suits their taste. Switching costs for customers are low, as switching from one manufacturer to another does not pose any threats. The fact that customers can so easily switch between competitors raises competition significantly in the ice cream industry.
CONCLUSION – OVERALL COMPETITIVENESS IN THE INDUSTRY BASED ON CUMULATIVE APPRAISAL OF “5 FORCES”
Based on Porter’s Five Forces, competition in this industry is strong. The intensity of rivalry is strong, along with the number of substitutes to ice cream and switching costs for customers are low, all point towards a competitive industry. The fact that there are so many barriers to entering this industry slightly reduces the competition amongst rivals, however, this one force does not overcome the competitiveness throughout.
iv. DRIVING FORCES [major factors influencing the industry]
Ice cream is considered a normal good. Statistical evidence indicates that ice cream consumption increases with income and education.
Expectations of falling tariffs (result of the Uruguay Round of the General Agreement on Tariffs and Trade, the tariff would be reduced in the year 2000) on dairy products suggested new opportunities for ice cream imports from abroad.
Japanese consumers were known for demanding high-quality products with great varieties of styles and flavours.
Depreciation of the Japanese currency would push the price to a level that would not make it feasible to export the product to Japan.
v. KEY SUCCESS FACTORS [KSF’s]
• Producing a consistent, quality product.
• A company’s ability to differentiate their product and produce a quality and highly marketable product will determine their success.
• Having a close, reliable supplier.
• Attractive, intriguing, and different flavours of ice cream, frozen yogurts and sorbets along with attractive packaging
D. INTERNAL ANALYSIS
i. Products and Services and respective Life Cycle[s]
Although Ben and Jerry’s can no longer be considered an underdog in the industry, as they have established a name and good reputation for themselves, their product is still in the growth stage. Ben and Jerry’s is continually growing their market by constantly introducing new flavours to their product lines.
ii. Value Chain Analysis [highlight main components and issues re: Inputs – Transformation –Output & Infrastructure]
Ben & Jerry’s receives raw materials from various suppliers. They produce the various ice cream flavours and ship them out to respective customers (convenience stores, supermarkets, etc). To get their product into foreign markets, they utilize cold storage containers. They already have set up distribution channels in this respect, as they have already been shipping out to the west coast and Europe. This means that shipping the product to Japan will not be much of a feat as it is something that will not be new to them.
It is important to note that all perishable ingredients come from specific suppliers.
iii. Core, Competitive and Distinctive Competencies [address sustainability, tangible/intangible]
Core
• At least 12% butterfat in their ice cream.
Distinctive
• 7.5% of pre-tax revenues are donated to such social causes as “Healing Our Mother Earth” and “Centre for Better Living”.
• Giving their ice cream flavours unique names.
• Stockholder meetings were outdoor festivals where standard attire included cut offs and tie-dyed T-shirts and where Ben Cohen (co-founder) was liable to call the meeting to order in song.
• A policy at Ben & Jerry’s was that the highest paid employee would not be paid more than seven times what the lowest employee earned.
• Part of the anti-corporate culture of the company was a policy that allowed each employee to make up his or her own job title.
Competitive
• In addition to selling by the scoop, they began selling pints over the counter.
• In 1985 the company bought a second production plant nearby Springfield, Vermont. A third plant was later built in St Albans, Vermont.
• Introduction of new product lines such as frozen yogurts and sorbets
E. SWOT ANALYSIS
INTERNAL
Strengths
• Never creating a well-thought out marketing strategy, yet, becoming successful, reduced costs.
• Anti-corporate attitude gained much recognition in the eyes of many consumers.
• Wacky names for ice cream got much attention for the fun loving independent company.
• Free advertising by relying for publicity through press coverage of its founders’ antics and social interest causes (Jerry Greenfield drove out to Minneapolis and gained national pres coverage by picketing in from of the head quarters of food giant, Pillsbury, in response to Häagen-Dazs’ pressuring distributors to keep Ben & Jerry’s off of their trucks).
• Ben & Jerry’s ice cream had become so popular that it became available in every state.
• Their product was deemed a ‘superpremium’ ice cream that was more attractive and it allowed Ben & Jerry’s to charge more for their ice cream.
• Ben & Jerry’s had the country’s fifth highest share of the ice cream market and the second highest share of the superpremium ice cream market.
• They had achieved national distribution, primarily selling their product in supermarkets and convenience stores.
Weaknesses
• Three plants in the U.S. compared to Häagen-Dazs ’ two in the U.S. (Häagen-Dazs has larger market share than Ben & Jerry’s). Ben & Jerry’s plants were operating at about half of full capacity.
• The anti-corporate image isn’t as affective as it used to be, as they are no longer considered underdogs in the industry.
• Being too engaged in the cause of social justice doesn’t allow full concentration of the task at hand; making a profit, and gaining market share.
• Never creating a well thought out marketing strategy; doesn’t allow for best penetration of markets.
• Waiting until it was almost too late to “go corporate”.
• Economies of scale do not seem to work for Ben and Jerry’s.
• Unwilling to let go of 7.5% pre-tax charity giving policy.
• Ben & Jerry’s world wide sales = $150 million, Häagen-Dazs’ Japan Sales alone = $300 million; is Ben & Jerry’s too small to compete globally in this market.
• Will enter Japanese market 10 years behind Häagen-Dazs.
• The company had never had a professional CEO and had avoided commercial advertising, relying for publicity on press coverage of its founders’ antics and social interest causes.
• The company had lacked effective management in recent years.
• Ben & Jerry’s was beginning to lose market share in both the total ice cream market and, more important, the superpremium market.
• Ben & Jerry’s was intentionally slow to embrace foreign markets so the company’s few adventures overseas were limited. Ben & Jerry’s foreign sales were only $6 million whereas Häagen-Dazs’ foreign sales reached $700 million.
EXTERNAL
Opportunities
• Expanding to a larger market
• The Seven-Eleven deal could represent a sudden boost in the company’s flagging sales of the past several years.
• Japan has the second largest ice cream market in the world, with annual sales of approximately $4.5 billion.
• Incomes in Japan had increased dramatically from the 1950’s to the 1980’s and ice cream sales in Japan are based on the level of income.
• Japanese consumers were known for demanding high-quality products with great varieties of styles and flavours (which practically defines Ben & Jerry’s)
• The Japanese market seemed to welcome imported ice cream, and expectations of falling tariffs on dairy products suggested new opportunities for ice cream imports from abroad.
• If they enter through Seven-Eleven, their product will immediately be placed in freezer compartments of over 7,000 convenience stores in the country.
• Seven-Eleven had taken advantage of its size and its state-of-the-art logistics systems by buying product directly from suppliers, avoiding the several layers of middlemen that stood between most suppliers and Japanese retailers.
Threats
• Japanese ties may want to have too much control of Ben & Jerry’s upon entry.
• Häagen-Dazs has a huge hold on the market in U.S and abroad.
• Requirement to change recipe may change the flavour of the ice cream too much; may lose its own identity.
• Possibility that Japanese operations may become so important to Ben & Jerry’s (potentially accounting for a substantial portion of its sales) that Seven-Eleven could, in some fashion, control Ben & Jerry’s. Even if it’s not a part of Seven-Eleven’s motivation, it could be an outcome.
• Japan’s economy contracting; risk of negative exchange rate movements that could make exports to Japan no longer feasible, making Ben & Jerry’s financial picture less predictable.
• Time; any delay in deciding which option to choose would mean missing the summer 1998 ice cream season in Japan.
• As Ben & Jerry’s began to expand distribution throughout the Northeastern part of the U.S., it found it increasingly difficult to obtain shelf space due to crooked distributors.
• Ben & Jerry’s would be a late entrant into the Japanese market, more than 10 years behind Haagen-Dazs in gaining a foothold on the market.
• Commodity risk was also a serious concern in that the price of milk could rise in the U.S., hurting Ben & Jerry’s relative to competitors producing ice cream in Japan.
• If Ben & Jerry’s product isn’t selling well in the Japanese Seven-Eleven stores, Seven-Eleven could cut off Ben & Jerry at any point in time like they have with other ice cream products.
• The threat of Ben & Jerry’s just being another ice cream product in a Seven-Eleven store without any kind of brand recognition or position.
Observations/Conclusions of SWOT:
Ben & Jerry’s enjoyed almost immediate success with its introduction on the ice cream market. They quickly enjoyed a substantial market share of the U.S. superpremium market, exhibiting many internal strengths. Although their success looked almost impenetrable, many weaknesses and external threats including a lack of experienced management prevented Ben & Jerry’s from international achievement. Overall, success at home doesn’t mean success abroad.
Financial Situation Review
According to information provided in the case, economies of scale are supposed to have an impact on the manufacturing of ice cream. This does not seem to be the case with Ben and Jerry’s. During the years, that financial analysis was possible, Ben and Jerry’s was in a stage of growth. Sales were steadily increasing throughout the entire period, however, the profit margins had no such pattern. Between 1990 and 1993, their profit margins did seem to increase until 1994, when the company had a loss, even though there were no new acquisitions in that fiscal year. In 1995, the company did turn a profit, however, their margins were at 3.83%, and the years following, the margins were decreasing. It should be in Ben and Jerry’s best interest to overlook their processes and distribution channels to see where they may be able to cut some costs.
1990 1991 1992 1993 1994 1995 1996 1997
Rate of = Net Income = 2.6 = 3.73 = 6.67 = 7.2 = -1.86 = 5.94 = 3.92 = 3.89
Return Net Sales 77 97 131 141 149 155 167 174
on Sales
= 3.38% = 3.85% = 5.09% = 5.11% = -1.25% = 3.83% = 2.35% = 2.24%
**Please refer to Appendices 1-D, 1-E, and 1-F for detailed charts outlining Net Sales, Net
Income, and Profit Margins
ISSUE IDENTIFICATION:
• Should Ben & Jerry’s enter the market through the use of Seven-Eleven?
• Should Ben & Jerry’s let go of many marketing troubles and put their trust into the know-how of Ken Yamada to take care of all that in the Japanese market?
• Ben & Jerry’s world wide sales = $150 million, HD Japan Sales alone = $300 million. Is Ben & Jerry’s too small to compete globally in this market
• Will Ben & Jerry’s be able to stay true to its mission of supporting social causes by entering Japanese market? (Concept of social mission and corporate charity foreign idea in Japan) What social cause can be fought in Japan?
• Whether to introduce Ben & Jerry’s ice cream to the Japan market and if so, how.
• If Seven-Eleven were given control over the package art, what would that do to the benefits of developing a global branded product?
• Would consumers be confused about the placement of the product as they traveled?
F. ALTERNATIVES
• Holding off on the market entry into Japan
Pros: Japan’s economy was performing poorly and it could be years before it recovered. A financial crisis that devalued Thailand’s currency seemed to be sweeping across Asia. If the pending Asian crisis were to hit an already weakened Japanese economy, the economics of exporting ice cream from Vermont to Japan could become infeasible.
Cons: By not entering Japan, Ben & Jerry’s will be missing out on establishing themselves in the second largest ice cream market in the world.
International sales and market share will remain stagnant.
• Entry through Seven-Eleven stores in Japan
Pros: Immediate placement in the freezer compartments of over 7,000 convenience stores in Japan.
In the early 1990’s, the convenience store share of the ice cream market had increased and it appeared that these stores were now accounting for at least 40% of the superpremium ice cream sales in Japan.
Seven-Eleven had taken advantage of its size and state-of-the-art logistics system by buying product directly from suppliers, avoiding the several layers of middlemen that stood between most suppliers and Japanese retailers.
Cons: If the product was introduced to the market through a convenience store and it was just one of many brands there, would it be able to build its own brand capital in Japan as Haagen-Dazs had?
Seven-Eleven could potential cut-off Ben & Jerry’s if their product is not selling like they had with other ice cream brands (French ice cream manufacturer Rolland).
Due to the Japanese label needed in Japan, the product could not be shifted to another customer, nor could another customer’s product be shifted to Japan.
• Entry into the Japanese market through the Yamada Strategy
Pros: Yamada would position brand, devise and orchestrate the initial launch, and would take care of marketing and distribution well into the future.
By giving Yamada full control of the Japan market, Ben & Jerry would have instant expertise in an otherwise unfamiliar market.
They would also have relief from having to address many issues involved in putting together entry strategy an in ongoing market management.
Cons: No formal plan made for consideration and even if there was, Yamada would retain the right to change it.
Lack of control for Ben & Jerry’s, Yamada would have complete control.
G. RECOMMENDATIONS
After careful analysis and evaluaton of all alternatives, it is evident that Ben & Jerry’s should exercise the Yamada option. This option, if implemented properly, would provide Ben & Jerry’s with the best opportunity for success in the Japanese market.
Registered Members, login
Join now, it's free
Property of EssaySwap.com
