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Ben & Jerry’ s

Strategic Alliances for Profit and Social Good

Ben & Jerry’s manufactures superpremium ice cream products. Approaching business in an unconventional manner, Ben & Jerry’s believes that it is running a unique experiment: proving that business can be democratic, compassionate, politically principled, and profitable all at the same time. Headquartered in Waterbury, Vermont, Ben & Jerry’s mission is to give consumers a good, high-quality ice cream product, while designating a portion of the profits to support social and environmental issues.

Company Background

Ben & Jerry’s was founded in 1977 by two friends, Ben Cohen and Jerry Greenfield. The company features superpremium ice cream, frozen yogurt, and sorbet created from natural ingredients. The first Ben & Jerry’s retail store opened in a renovated gas station in Burlington, Vermont; the first factory was not opened until 1984. By 1985, sales had reached almost $10 million and by 2010 had soared to almost $500 million. The products are sold in the U.S. and 29 other countries around the world.
Ben & Jerry’s interest in social causes is not just an interesting beginning to a lucrative business or a marketing gimmick—Ben & Jerry’s “walks the talk.” In 1985, the company established the Ben & Jerry’s Foundation, which donates 7.5 percent of company pretax profits to an ever-changing list of charities. By 2008, this 7.5 percent had amounted to over $2.1 million per year. Yves Couette, the company’s CEO, has continued this vision of “caring capitalism.” He said: “As Ben & Jerry’s goes on a tour of the world, we will never forget where we’ve come from, who our friends and family are, and what we stand for.”
Ben & Jerry’s success has not been without its ups and downs. One of the downs occurred when Ben & Jerry’s entered the lucrative novelty ice cream market with its Peace Pops (an alternative to Dove Bars and Jell-O Pudding Pops). After six months, sales were 50 percent short of projections, mainly because the product flopped in supermarkets. Apparently consumers were not willing to pay for a superpremium product in supermarket channels. However, when the product was shifted to convenience store channels, sales increased by 60 percent.
On the up side, Ben & Jerry’s has been able to capitalize on its customers’ loyalty, based on its reputation as a concerned corporate citizen. For instance, the company marshaled grassroots support to counteract Pillsbury’s efforts to prevent distributors that carried its Häagen-Dazs ice cream from selling Ben & Jerry’s ice cream products. Ben & Jerry’s efforts included a bumper sticker campaign, an 800 number, and a media kit containing a complaint letter to Pillsbury and a letter to the state attorney general. Ben & Jerry’s low-budget, high-social-consciousness campaign resulted in considerable media hype, painting Pillsbury as the “bad guy” and Ben & Jerry’s as the underdog that represented everyman’s interest. This positive media attention set the stage for future innovative marketing approaches.
In August of 2000, Ben & Jerry’s agreed to a unique and groundbreaking combination in which Ben & Jerry’s was bought out by Unilever and became a wholly owned subsidiary of this multinational consumer products company. This union was expected to create an even more dynamic, socially positive ice cream business with global reach. In commenting on the transaction, cofounders Cohen and Greenfield said:

Neither of us could have anticipated, twenty years ago, that a major multinational would some day sign on, enthusiastically, to pursue and expand the social mission that continues to be an essential part of Ben & Jerry’s and a driving force behind our many successes. But today, Unilever has done just that. While we and others certainly would have preferred to pursue our mission as an independent enterprise, we hope that, as part of Unilever, Ben & Jerry’s will continue to expand its role in society.

Products

In addition to pint ice cream, Ben & Jerry’s expanded product line includes frozen yogurt, sorbets, and novelty items such as Peace Pops and Brownie Bars. The company also has a line of Conscious Concoctions, specialty ice cream products whose manufacture promotes quality of life and social responsibility in a specific community.
For instance, one flavor of Conscious Concoctions is Chocolate Fudge Brownie ice cream and frozen yogurt, produced in the Greyston community in Yonkers, New York. At this plant, previously unemployed and underskilled people produce more than 2,000 pounds of brownies per day. The Greyston Community Network uses the profit for such programs as housing and job training.
Rainforest Crunch ice cream and Peace Pops use cashews and nuts from Brazilian rainforests. As an alternative to destroying these resources, profits from the ice cream are reinvested in the people who harvest the nuts. The money is used to develop factories cooperatively owned and operated by the rainforest people.
Maine’s Passamaquoddy Indian tribe sells its blueberry crop to Ben & Jerry’s to make Wild Maine Blueberry ice cream. There is a message about First Group, the nonprofit organization that supports Native American life, on every container of this product. The profits support the Indians’ economic development and way of life.
Another flavor of Conscious Concoctions is Fresh Georgia Peach Light. Ben & Jerry’s buys all the peaches from a family farm in Georgia as a way to support the endangered livelihood of the family farmer.

Marketing Strategy

Ben & Jerry’s has a reputation for producing gourmet quality natural ice cream and for creating innovative lighthearted promotions. Most of Ben & Jerry’s marketing revolves around sponsoring peace, music, and art festivals all over the country. During these events, the company draws attention to many social causes as it promotes its products. Ben & Jerry’s uses a mere 6 percent of its earnings to advertise, and most of this is used to fund music festivals. The primary goal is to use advertising dollars to return something to the consumer and promote consumer activism.
With a low marketing budget, Ben & Jerry’s relies heavily on free publicity to generate product awareness. Says one industry analyst, “Ben & Jerry’s does not spend much on advertising, but they are very good at marketing.” By supporting a variety of social causes, it is able to stay in the news often enough to make this strategy pay off.
The company also relies on sample promotions. At all company-sponsored events, it distributes ice cream, sometimes free of charge. Ben & Jerry’s also promotes its products through the renowned “circusmobile.” This unique vehicle travels from city to city performing free vaudeville shows and giving out samples. In keeping with the company’s social consciousness, the “circusmobile” bus uses solar energy to supply the power needed for the shows. Another promotional strategy is to provide free ice cream to any legitimate charitable group that asks for it.
In 1995, Ben & Jerry’s became an early user of the Internet to provide company information, from flavor lists to “whens” and “wheres” of the social awareness events. The company has also creatively used the packaging of some of its products, such as Peace Pops, to invite customers to learn about these social causes on its Web site and Facebook page.
Even though Ben & Jerry’s is still committed to its social mission, Unilever has introduced a more disciplined, focused approach to the company’s marketing strategy. This initiative involved the establishment of companywide goals that included two very broad social mission programs: combating global warming and publicizing abuses of West African children who are conscripted into the production of cocoa. Introduced publicly in 2002, the campaign was designed to educate consumers, change personal habits, and alter public policy in support of the goal of reducing carbon dioxide emissions and slowing the impact of global warming.

Distribution Strategy

Ben & Jerry’s markets its ice cream, frozen yogurt, sorbet, and novelty items at the retail level primarily through supermarkets, grocery stores, and convenience stores. The company also markets ice cream and frozen yogurt in 2½-gallon bulk containers through franchised (called Scoop Shops) and company-owned ice cream shops and through restaurants. Mail-order and online channels are also used, and licensing arrangements have been developed for international sales. Exhibit 1 provides a diagram of Ben & Jerry’s distribution channel structure.

Supermarket Distribution

Ben & Jerry’s concentrates heavily on national distribution through supermarkets. Supermarkets are a growing business, accounting for much of the company’s sales growth. Most of these supermarkets are reached through wholesalers selected by Ben & Jerry’s.
The company’s distribution strategy is different from that of other superpremium ice cream companies. Ben & Jerry’s is much more selective about who sells its products. First, wholesalers must have adequate access to retail outlets as well as trucks and facilities to handle the ice cream at proper temperature ranges. Second, wholesalers must demonstrate that they operate socially conscious businesses. As one executive stated, “We have an opportunity not only to create alliances with businesses that share our social vision, we also seek to influence and encourage other businesses to use their resources to address social concerns that are part of their own experience.”
Ben & Jerry’s ice cream is distributed throughout the U.S. by independent regional ice cream distributors. Outside of North America, Ben & Jerry’s products are marketed and distributed by affiliated companies within Unilever, and a third-party licensee in Israel.
The company believes its relationship with distributors is generally good. With the buyout by Unilever, Ben & Jerry’s believes it has more access to additional established Unilever supplier relationships as well.

Franchising

As of December 2010, Ben & Jerry’s had 750 franchise Scoop Shops worldwide.

Ben & Jerry’s supports franchisees with a special interest or social focus. For example, it waived the franchise fee for a Baltimore shop owned by People Encouraging People, a nonprofit organization that hires and trains people with psychiatric disabilities.
Most of the company’s franchise agreements are for a ten-year term with the option to renew for another ten years. The franchise is granted an exclusive area, and it must purchase all its ice cream and other specified items from the designated local distributor. Each must pay an initial franchise fee of $37,000 per store as well as a 3 percent royalty on gross sales. The franchisee also pays an advertising fee equal to 4 percent of its total gross sales, which Ben & Jerry’s uses for regional and local advertising.
In addition, the company has entered into several exclusive area franchise agreements by which the franchisee agrees to pay a specified franchise fee in installments and to open a specified number of stores in a particular territory according to a specified schedule. The franchisee is given exclusive franchise rights in the territory.

Mail Order and Online Sales

One distribution strategy that Ben & Jerry’s uses is quite different from other superpremium ice cream companies: The company offers customers the option of buying ice cream online or by mail. Ben & Jerry’s packs its ice cream and frozen yogurt in dry ice and ships it anywhere in the United States. Customers can choose from a wide variety of flavors.

International Licensing

Since 1987, when Ben & Jerry’s began to expand internationally, the company has granted international licensees the right to establish new franchisees to sell Ben & Jerry’s ice cream and can also sublicense the manufacture of the ice cream. The licensee must pay an initial fee, plus royalties on the franchises. The agreement is for a ten-year period with the option to renew. Ben & Jerry’s has a different renewal policy for each country, and the company reserves the right to terminate an agreement if the licensee does not abide by the terms.

In 1990, Ben & Jerry’s entered into a joint venture agreement, called Iceverk, in what was then the Soviet Union, to establish a Ben & Jerry’s ice cream parlor in the state of Karelia. The goal was to provide a model of a small-scale private enterprise while fostering international cooperation and global understanding, with profits from the joint venture to be used for cultural student exchanges. Most of the raw materials were purchased in Russia, but some dairy ingredients were purchased in Finland. Twenty-five percent of the finished ice cream products were shipped back to Finland for resale.
However, Ben & Jerry’s came across some distribution obstacles in these emerging Russian markets. Russia still lacks a developed wholesale distribution system that will deliver products to stores on time, consistently, and in good condition. Also, distribution in Russia is often controlled by a monopoly with links to organized crime, creating expensive substandard conditions. The company also encountered the lack of customer service to which the Western-style customer has become so accustomed. Ben & Jerry’s has made an avid effort to mitigate these hurdles in Russia by creating its own diverse distribution system.
However, by 1996, the business climate in Russia was changing so rapidly that Ben & Jerry’s felt their management of Iceverk was becoming less effective. They began to understand that their local partners had become better equipped to manage Iceverk. Therefore, they decided to donate the manufacturing equipment to Iceverk and donate the equity in Iceverk to the local partners. The agreement with Iceverk was officially terminated in 1997.
With the creation of an international expansion team to develop the company’s growth overseas, Ben & Jerry’s has gained increasing momentum on the international scene (Already in 29 foreign countries and more are expected to be added in the future).

Discussion Questions

1. Do you think Ben & Jerry’s strategic alliances with wholesalers, franchisees, and international licensees are viable in the long run, given that Ben & Jerry’s expects more from its partners than simply earning profits?

2. Given the multichannel arrangements used to distribute Ben & Jerry’s products, do you see a potential for channel conflict developing despite Ben & Jerry’s noble intentions?

3. Do you think Ben & Jerry’s existing channel structure is an ideal one, given the kinds of social objectives the company is pursuing? Explain.