Individual Case Write-ups
Ben and Jerry’s Homemade Ice cream Inc.
I would like to start with the brief history of Ben and Jerry’s. It is a medium sized ice cream company with the annual sale of about $150 million. It was incorporated on December 16, 1977 by two friends Ben Cohen and Jerry Greenfield who were not satisfied with their careers. It was an immediate success but in 1990 with the healthier eating trends, its sale slowed causing the net loss of $1869000 which led to the resignation of its CEO Ben Cohen in June 1994. In February 1995, Bob Holland was chosen as new CEO of Ben and Jerry’s.
Ben and Jerry’s focused more on quality of product and making mix in flavours which led to its cost going up but as the consumers preferred good quality ice cream, it had market share of 30% in 1990. Its net income increased from $551,000 in 1985 to $7,201,000 in 1993. In 1994, it added new flavour of ice creams and replaced the flavours which were slow moving. It added super premium frozen yogurt, which which increased its sale by 34%. In spite of its sale going up from $9,858,000 in 1985 to $148,802,000 in 1994, it went in losses in 1994 due to increase in its cost of production, inefficient production planning, doubling its production and improper inventory management.
So, according to me, this strategy does not seem well matched with their external environment.
Their strategy led to competitive advantage till 1993. In 1990, completion became extremely intense. Leading brand entered the market. Consumers also shifted from super premium to less expensive premium brands. Dreyer’s Grand used extensive distribution network and it also manufactured for other firms. Ben and Jerry’s was also making 40% ice creams for Dreyer’s Grand which gave competitive advantage to Dreyer’s Grand as it was key competitor of Ben and Jeff’s. In 1992, Haagen Dazs was also the competition of Ben and Jerry’s. It was established in 1970 in New Jersey. It was the leader in superpremium ice cream and when it found its leadership threatened it started giving intense competition to Ben and Jerry’s for market share. It started giving discounts to much bigger degree and began to use advertising intensely. Haagen Dazs also introduced new products in mix-in ice creams but still the business of Ben and Jerry’s kept on flourishing and its sale increasing till 1993.
There were many problems faced by the company. Ben and Jerry’s held unconventional approach so it didn’t spend money on marketing from the year 1985 to 1994 which is must for competition which kept them behind their competition. With the increase in competition in 1994, Ben and Jerry’s had to spend their finances on advertisement and in-store discounts which increased their cost and despite of being increase in the annual sales, they were in losses. Secondly, the production system in third unit were not modernised according to the needs, which lead to the fourth quarter loss in 1994. Thirdly, there was a great amount of disparity in the pays given to the employees. Fourthly, their internal policies and company’s culture was unconventional. Fourthly, both Ben and Jerry’s were not properly educated and they did not have CEO with professional background due to which they suffered problems in their management. The socio-economic moment was not up to the mark and it came under severe criticism. Fifthly, they never issued dividend to the shareholders and reinvested for the future growth due to which shareholders loses trust in