Macro Analysis of Ben and Jerry's

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22nd Jun 2020 Report Reference this

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Executive Summary

Ben and Jerry’s first opened their doors in Vermont in 1977.  They were a new homemade ice cream shop.  They had entered a very competitive industry with an investment of $12,000 dollars.  They showed no lack of business as they saw success very quickly.  One of the factors that led to their instant success was the packaging of their product into little pints and sold them to retail outlets. Along with all of the success that is occurring with this company along comes an organizational problem. The 5 to 1 compensation rule.  This is causing some unhappy employees and can lead to bigger and worse things. To fix this they need to get rid of it and base pay off of the work that is being completed.  The company is also afraid to change their values as a company and are stuck in a state of active inertia.  If something is not done soon then there will be a slow decline within the company, and eventually lead to worse things.

Company:

Founders: Ben Cohen and Jerry Greenfield President: Chuck Lacy Chief Executive Officer: Chico Lager Director of Special Projects and GM: Charles Lacy Officer, Legal Consultant, and Director: Jeffrey Furman Production Manager: James Miller

Mission:

The mission of Ben and Jerry’s is to separate themselves from other companies. They will do this by having a strong and unique set of values.  They also want to be a place for social change and not be seen as a typical corporation.  By doing all of this, they will be seen as more than a corporation and separate themselves from other big companies throughout the industry.

Defining the Problem:

The first problem within Ben and Jerry’s is that they grew larger and more complicated than expected.  This is causing there to be issues within the structure of the company.  Middle level employees saw limited chances for promotions.  Managers were also not being paid high enough compared to the average.  Also the 5-1 rule within the company is causing issues. This is a compensation rule.  This is causing the lower level jobs are getting more money that is expected within that market.  Meanwhile the higher ups are getting paid lower than expected within that market.  This is causing unfairness within the workplace.  Another problem is that the company is afraid to change their values.

Macro Environment Scan:

Environment - The environment was a huge deal for the company of Ben and Jerry’s.  As a result of this they made and investment in a state of the art greenhouse technology.  This was for wastewater treatment at the plants and the appointment of an environmental affairs director. (pg. 8, Theroux) Economic - The frozen dessert market was slowly growing.  The total retail value of ice cream and related products sold in the United States was $9.3 billion or 1.5 gallons.  So this industry is obviously growing, which could also be an opening for more competitors. Demographic - 94% of households ate ice cream, and the consumption was highest among families with young children and persons over 55 years old (pg.3, Theroux).  They are selling to the right target market and are keeping up with the trends. Social Culture - Ice cream is a household item that many families have.  Children love it and so do older people.  There will always be a demand for this product, and as trends change Ben and Jerry’s has to keep up with it.

Porter’s 5 Forces

Threat of new entrants:

The threat of new entrants within the ice cream industry is very low for Ben and Jerry’s.  Many smaller companies such as Steve’s Homemade Ice Cream and Shanitoff Foods tried to join the industry but failed very quickly.  It is very hard to reach the level of the big ice cream companies.

Threat of substitutes: 

There are only a couple of substitutes that can threaten ice cream companies. The first one is the frozen yogurt industry.  This is a growing industry and is the next closest thing to ice cream.  Another substitute can be non-dairy ice cream.  This can be consumed by people who cannot put dairy into their bodies.  I don’t see these products as being a big threat to Ben and Jerry’s but they definitely are substitutes.  So this force is also low.

Industry Rivalry:

The competitors within this industry that give Ben and Jerry's the most company are Kraft (Frusen Gladje) and Pillsbury (Haagen-Dazs).  They are always infiltrating the market by introducing new products like lighter ice cream.  Other than Ben and Jerry’s Haagen Dazs and right on top of the market.  Even though there are not many competitors, the competitiveness between these companies are very high. Because of this I would say this force is high.

Power of the Buyer:

The buyer has a lot to do with the success of ice cream companies.  They can either make or break a company.  The better the ice cream is the more likely people are to buy it.  Ben and Jerry’s is a household ice cream company too.  They are known around the world. As a result of this people will always buy their ice cream.  This force is also low.

Power of the Supplier:

Ben and Jerry’s get their dairy products from Vermont, where they originated.  After that they get shipped to Indiana for processing in the Dryer’s plant.  The company only uses dairy products from Vermont.  They want to keep the home feeling and using products from where the company first began.  Even though it is very easy to find products to make ice cream.  It seems as if this supplier can hold a lot of power because of what it means to Ben and Jerry’s.  As a result of this I would say the power of the supplier is high. After evaluating Porter’s 5 forces for Ben and Jerry’s.  I have come to the conclusion that the pricing power of them is very high.  They seem to control a lot of the variables that go into pricing.  This is a big reason to why they are so successful.  They can price their products high and still appeal and satisfy their customers.

SWOT Analysis

Strengths: Value of their product Selling their ice cream by the pint Taste and creaminess of their ice cream Distributing their product through a variety of channels 12 core markets and achieved distribution in every chain in those markets     Weaknesses: 5-1 compensation rule Active Inertia (higher ups don’t want to change their values) “Caring Capitalism” Not enough healthier options within their ice cream
Opportunities: Introduce new products such as frozen yogurt and nondairy ice cream New flavors Opening plant and adjacent scoop shop in Karelia, Soviet Union Threats: Other ice cream companies that offer healthier ice cream Substitution product industries growing(frozen yogurt)

4 P’s

Product:

Ben and Jerry’s product is very simple. It is their ice cream and the reason why they are so successful and appeal to so many people.  They are most popular for selling their ice cream in pints. They also have ice cream shops set up where they sell the ice cream to people in the traditional way.  Their ice cream is also super premium meaning it is high in fat and low in air.  This makes the ice cream richer and more enjoyable.

Price:

The price a Ben and Jerry’s ice cream is a big reason as to why they are so successful.  They are in the super premium market, which means their ice cream was higher in fat and had low amount of air in the ice cream.  Because of this they can price their ice cream higher than ordinary ice cream companies.  They price the ice cream 4 times the price of regular ice creams.

Promotion:

Ben and Jerry’s saw space for promotion on their lower mix in costs.  One of these products was the frozen yogurt.  These were promoted by new marketing strategies created by the company.  They also promoted their ice cream by adding new unique flavors.  The company also sponsored music festivals to get the word out about their ice cream.  They also used their pint containers to get social messages across to people.

Place:

Ben and Jerry’s have two primary distributors for their ice cream.  They are Dreyer’s Grand Ice Cream Inc., and Sut’s Premium Ice Cream.  They also have local distributors other than these two companies, but these are their main ones. Dreyer’s is responsible for distributing the ice cream in all of the companies markets except for New England, Florida, and Texas.  Sut’s took care of New England (pg. 5, Theroux).

Value Prop:

Ben and Jerry’s want their customers to taste their ice cream and want to come back for more.  They do this by implementing values and traditions within their ice cream.  Along with their rich creamy taste. They appeal to customers by their wide variety of unique never before seen flavors.  They are way more appealing than the other competitors within their industry, and have a taste to prove it.  You don’t have to go to an ice cream shop to buy their delicious ice cream either.  They sell pints of their world renowned flavors in local gas stations, supermarkets, and etc.

Financial Analysis:

After studying Ben and Jerry’s financial reports, you can see a positive trend.  Their net sales have drastically increased over the years which is great for the company.  Also their gross profit has increased.  This means they are bringing in more money than before.  That is always vital within a growing company.  The only issue I saw within their financials was with their percent of volume.  It seems that they are struggling to get rid of their larger volumes of ice cream.  Their half gallons and bulks take up most of that.  They need to find a way to get rid of that or they have to stop producing so much.

Implementation:

Ben and Jerry’s are one of the most successful ice cream companies in the world.  But this doesn’t mean they are problem free.  The main problem I see within the industry is the 5 to 1 compensation rule.  This created a spread between the lowest and highest paid employees of five times a dramatically narrower differential than a 90 to 1 norm in American business (pg.1, Theroux).  This was mainly a policy to make lower level employees get paid more than the norm.  But this affected the higher ups in the company like managers.  They were getting paid lower than the norm.  This can look appealing to the lower employees, but the higher ups did not like this policy.  So the first thing Ben and Jerry’s has to do is get rid of this rule.  Completely wipe it out and never look back.  Workers should get paid by the quality of work they are completing or doing.  This is a fair system that will make everyone satisfied.  The higher ups are the reason why the company runs the way it does, so why make them unhappy.  They should be getting the money they deserve.  Lower level employees are easier to replace rather than the higher ups. The second problem that I see within the company that may be the cause to them keeping the 5 to 1 rule, is the lack to want to change.  They are in a state of active inertia. They need to get out of it or they will slowly go downhill as a company.  Change is a hard thing for some people but to compete as the industry and the world changes you need to.  Being so successful may be blinding the higher ups to the problems that are occurring or that will eventually occur.  This company has to have a meeting and ask themselves, what do we need to change?

References

  • Theroux, J. (1995) Ben & Jerry’s Homemade Ice Cream Inc. Keeping the Mission(s) Alive. HBS No. 9-392-025. Boston, MA: Harvard Business School Publishing

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