Evaluation of Ben and Jerry's Mission Statement

Executive Summary

Ben & Jerry’s immediate problem is conflicting views on which part of the mission statement should be the driving force when conducting business; the social or the economic mission.  The founders of Ben & Jerry’s, Ben Cohn and Jerry Greenfield, believe the main focus of the company should be on helping to promote social change, while other high-level officers and the board argue that being profitable as a business is more important (Theroux, 1991).  In particular, the 5-to-1 salary ratio has become an area of concern for management and the board, because the company is having trouble recruiting qualified senior-level managers with a compensation package below market rate (Theroux, 1991).  On the other hand, Ben Cohn and other employees believe the 5-to-1 salary ratio is symbolic of the social change movement that Ben & Jerry’s has emphasized from the start (Theroux, 1991).  The recommendation for this disagreement in views is to set a 25-to-one salary ratio to attract a few qualified senior-level management candidates, while also staying true to the company’s philosophical roots.  Ben & Jerry’s also needs to come up with a strategy to ensure continued success in the ice cream industry (Theroux, 1991).  The main focus will be to increase or maintain the same level of sales and superpremium market share as the company has now.  Ben & Jerry’s can accomplish these two goals by increasing production in their healthier options, raising product price to support quality improvement, and continuing to promote social activism.

Situation/ Environment Appraisal

Conducting a macro-environment scan will reveal different factors in the outside world that have an effect on the company.  In terms of social norms, a greater portion of the baby boomer population is becoming more concerned with the amount of fat and cholesterol they are consuming (Theroux, 1991).  This could lead to an increase in demand for the Ben & Jerry’s Light ice cream and a decrease in demand for the superpremium ice cream within the older demographic (Theroux, 1991).  In addition, presumably because of the boom in the stock market, over the past few years consumers have started to see ice cream as an affordable luxury (Theroux, 1991).  This economic force has the effect of increasing consumer demand for the entire ice cream industry.  Technological, legal, and environmental forces are not seen as particularly strong forces in the macro-environment.

Five Competitive Forces

New Entrants   relatively weak force on pricing power	Buyers   potential for strong force on pricing power In reality, weak force on pricing power Existing Competitors high force on pricing power
Suppliers   strong force on pricing power	Substitutes                                             strong force on pricing power

It will be possible to understand Ben & Jerry’s pricing power by completing an analysis of the five competitive forces.  The threat of new entrants, and their ability to decrease Ben & Jerry’s pricing power, is relatively low because the ice cream market is large and has a slow growth rate due to being a mature market (Theroux, 1991).  Buyers can greatly influence Ben & Jerry’s pricing power because the switching costs for ice cream are relatively low and there are other companies, such as Haagen-Dazs and Edy’s, selling similar products (Theroux, 1991).  Although, in practice market research showed that ice cream consumers valued the quality of ice cream over the price (Theroux, 1991).  Thus, Ben & Jerry’s could increase the price of their product if the price increase correlated with added quality.  Suppliers for Ben & Jerry’s have an effect on their ability to earn a profit.  Since Ben & Jerry’s takes pride in making their ice cream in Vermont with dairy ingredients from there as well, the suppliers can charge more for their products (Theroux, 1991).  In fact, the higher costs associated with using ingredients from Vermont led to lower profit margins, however Ben & Jerry’s continues to use these suppliers because the positive image this creates outweighs the added ingredient cost (Theroux, 1991).   Existing competition will have quite an effect on Ben & Jerry’s pricing power.  Since leading brands have already entered nearly every ice cream market and the market growth is estimated to significantly drop to about 5%, there is more pressure for ice cream companies to achieve normal growth rates by competing for more market share (Theroux, 1991).   Thus, the competitive environment in the superpremium market will become very cutthroat and will reduce Ben & Jerry’s pricing power.  The vast array of substitutes for ice cream has a negative effect on Ben & Jerry’s pricing power.  For example, if Ben & Jerry’s increases the price of their ice cream too much consumers will choose to buy other desserts such as milkshakes.  The competitive forces analysis reveals that Ben & Jerry’s has low to moderate pricing power.  Thus, it is essential that the company keeps their prices around competitor’s prices or continues to invest in creating new mix-in flavors to command a higher price (Theroux, 1991).

SWOT Analysis

Strengths adding more and larger mix-in ingredients to ice cream   gaining customer respect and loyalty by supporting social change   (Theroux, 1991)	Weaknesses inability to attract senior-level managers focus on mix-in ice creams even though traditional flavors produce higher gross margins than mix-in ice creams   (Theroux, 1991)
Opportunities ice cream consumers value quality more than price (Theroux, 1991)	Threats almost all the increase sales in the superpremium and premium ice cream markets came from middle ice cream markets   (Theroux, 1991)

Ben & Jerry’s strength of adding larger mix-in ingredients can contribute to their ability to charge a higher price and their customer respect and loyalty from supporting social change is associated with favorable brand recognition in the public.  The company’s weakness of not being able to attract senior-level managers can hinder the company from succeeding in the future and their focus on mix-in ice creams means they will have to sell more units than other companies selling traditional flavored ice cream.  The opportunity that ice cream consumers value quality more than price means the company can increase price as long as quality increases as well.  The threat that almost all increases in the superpremium market come from middle ice cream markets signals  Ben & Jerry’s should focus on promoting mostly superpemium ice cream.

Analysis

Ben & Jerry’s value proposition is that the company makes high quality ice cream with a generous amount of added ingredients mixed in.  In addition, the customer knows that he or she is supporting a company that actively engages in social change.

Organizational analysis

The founders of Ben & Jerry’s were adamant that the company would be a source for social change (Theroux, 1991).  More specifically, the company would operate in a “caring capitalism” manner (Theroux, 1991).  This caring tone involved sourcing ingredients for a social purpose, establishing Ben & Jerry’s Foundation to help communities, organizing 400 companies into a group that encourages peace through understanding, and implementing programs to assist their workers (Theroux, 1991).   Ben & Jerry’s has received a fair amount of publicity for their intense focus on social activism and workers were motivated by the social mission (Theroux, 1991). Another way that social change would be accomplished was to implement a 5-to-1 salary ratio, which only allowed the highest paid worker to be paid five times as much as the lowest paid worker, instead of the 90-to-1 salary ratio that prevailed in the American business world (Theroux, 1991).   This policy was made to connect top management pay to the rest of the company’s pay, while also highlighting the issue that top management was often overpaid at the expense of entry-level workers being underpaid (Theroux, 1991).  The board and other company members have started to reject this policy for a few reasons (Theroux, 1991).   First, the scope and difficulty of the higher-level positions within Ben & Jerry’s have increased and now require more compensation (Theroux, 1991).  Second, recruiting new managers from outside the company is difficult because other companies offer more compensation to do similar jobs (Theroux, 1991).  Third, mid-level employees can lack incentive to do well and be promoted since the compensation for moving up in ranks is relatively low (Theroux, 1991).    The 5-to-1 ratio within Ben & Jerry’s is quite different from the standard 90-to-1 ratio, and has the potential to hinder the company’s future.  Although the 5-to-1 salary ratio model came from a place of social activism, the company has grown and a different approach to compensation needs to be considered.  The compensation system pays low seniority employees above market rates and pays mid to high-level employees below market rates, which will lead to an abundance of candidates in the entry-level jobs and a low number of qualified candidates for the mid and senior-level positions (Theroux, 1991).   Ben & Jerry’s has been successful in the past by using the 5-to-1 salary ratio, however the company has evolved and a change to the salary ratio is needed to reflect this.  The company should implement a 25-to-1 salary ratio to attract mid to high-level managers while still moderately connecting top management pay to the rest of the company’s pay.

Marketing Mix

Product large variety of flavors high-quality ice cream brand recognition   (Theroux, 1991)	Price   differentiation   higher prices   (Theroux, 1991)
Promotion educational events factory tours	Place two main distributors   retail shop,  food service companies, and  grocery store   (Theroux, 1991)

Product, price, placement, and promotion are key components to a successful marketing strategy.  The product strategy for Ben & Jerry’s is providing a large variety of unique high-quality ice cream flavors.  In particular, Ben & Jerry’s focused on producing the mix-in flavors (Theroux, 1991).  Part of Ben & Jerry’s brand is providing new combinations of ice cream flavors and mixed-in ingredients for consumers to try.  The preferred method of distribution in the superpremium ice cream market was to do “direct store delivery” which included distributor representatives delivering and placing the product at the store (Theroux, 1991).  Although, this method is seen as the best way to ensure a good flavor selection and prime shelf space; it cost more to implement (Theroux, 1991).  The placement strategy for Ben & Jerry’s is to distribute through two main distributors, Dreyer’s Grand Ice Cream, Inc and Sut’s Premium Ice Cream, while local distributors delivered product to limited market locations (Theroux, 1991).  In fact in 1990, sales to Dreyer’s Grand Ice Cream and Sut’s Premium Ice Cream represented just over half of Ben & Jerry’s total company sales (Theroux, 1991).  Further research would need to be conducted to see if the increase in cost for having distributor representatives would be less than the increase in sales from having these representatives make flavor selections and shelf space choices.  After going through the distributor, the ice cream is either purchased by Ben & Jerry’s retail shop and food service companies in large quantities or is bought in smaller quantities by individuals at the grocery store (Theroux, 1991).  The pricing strategy that Ben & Jerry’s uses is differentiation, which allows the company to charge a higher price for providing unique products.  The company is able to command higher prices by using a larger size and amount of added ingredients into their ice cream (Theroux, 1991).  Promotion for Ben & Jerry’s includes doing social issue educational events and factory tours of the Waterbury plant which half of the admission revenue goes to local charities (Theroux, 1991).  These promotion methods helped to promote the product and social activism.

Conclusions

Implementing a 25-to-1 salary ratio has the ability to attract a few qualified senior-level management candidates while also staying true to the company’s values by only allowing a modest spread between the highest-paid and lowest-paid employees.  This salary ratio compromise will allow the price of salaries for top management to be five times as high as they are now.  In addition, all employees in positions above the entry level will see compensation increase as well.  The compensation increase an employee receives will correspond with the level of the employee’s position in the company.  It is also important to note that the entry level compensation will not go down when this new salary ratio is set.  Although this may satisfy a majority of workers, the costs to implement this plan are high.  To cover these costs salaried workers will be asked to work an extra five hours a week.  Competitors may see the new salary ratio as a threat to their talent acquisition efforts and increase their own salaries.  Customers may see this as a shift toward the traditional corporate America mentality and may not be as loyal to the brand.  There are other risks to this decision as well.  One risk is that the salary increase is still not enough to attract new senior-level managers.  The company will have incurred a large expense of increasing wages without the benefit of obtaining a highly qualified manager to help the business become more profitable to offset this increase in costs.  Another risk is that some employees will see this as shift from the core values of the company and will quit, leaving the company understaffed while new employees are being hired and trained.  Increasing production in healthier frozen dessert options, increasing product price for quality improvements, and continuing to promote social activism have all been identified as ways to increase the level of sales in the future.  Increasing production in healthier frozen desserts will be costly due to possible additions to capital equipment and the increase in production costs when more employees need to be hired or overtime is paid to existing workers.  Competitors may see this increase in the healthier frozen dessert market and increase their own production of similar goods which will decrease the pricing power Ben & Jerry’s has.  Customers will either see this as a product to buy with their existing usual purchase, a product to buy instead of their existing purchase or will be uninterested in the new product and buy another existing product.  Increasing product price for quality improvements will allow cost per unit to go down if the price increase is higher than the added cost for increased quality.  The competitor may react by increasing their quality as well or decreasing their existing price.  Customers will either see the quality improvement worth the extra money or will switch to a cheaper ice cream choice if they don’t see the quality improvement as a fair tradeoff for an increase in price.  A risk to this strategy would be having the added cost for the improvement in quality being higher than the increase in price that the customer is willing to pay.  By continuing to promote social activism, Ben & Jerry’s will continue to have higher costs than other business models due to charity expenses.  Competitors may try to imitate the emphasis on social change to gain a trusting and supportive customer base.  Customers may continue to support the company in the future due to Ben & Jerry’s commitment to social causes.

Works Cited

• Theroux, J. (1991).  Ben & Jerry’s Homemade Ice Cream Inc.: Keeping the Mission(s) Alive.  Harvard Business Review, 1-22.