Term Paper, 2002
46 Pages, Grade: A
Description of the super-premium ice-cream-market
General corporate strategies
Social company image
Analysis of Ben & Jerry’s strategy
Five Forces Model of Competition
Rivalry among competing sellers
Potential new entrants
Key success factors
The acquisition by Unilever and the impacts on the strategy
Expansion into the Japanese market
The Japanese market for super-premium ice-cream
Analysis of the expansion
Ben & Jerry’s is one of the best known super-premium ice-cream manufactures in the United States. In 1998 Ben & Jerry’s expanded its business to Japan, the second largest ice cream market in the world. It was a significant step in the company’s history and strategic orientation. In the beginning they had to face several problems which had to be solved before entering the market. This planning phase took from 1994 to 1996 followed by a test market phase in 1997. One of the mayor problems was to find a partner who could provide an adequate distribution network. Ben & Jerry’s finally decided to enter the market with the help of Seven-Eleven Japan Co. Ltd., which is a franchise convenience store chain of about 8,000 stores in Japan. This made it possible for Ben and Jerry’s to offer their ice-cream to a lot of people without building up their own distribution network. The company could also make use of the experience of Seven-Eleven who obviously can better assess the Japanese’s need and habits.
In 2000 Ben and Jerry’s was acquired by Unilever, a multinational food and personal products company. This acquisition gives Ben and Jerry’s the possibility of using the existing distribution channels and reduce the dependency on other companies. Also with Unilever as its parent company the company has a new financial strength which allows them to expand marketing strategies and research and development.
Based on the following analysis Ben and Jerry’s is very good positioned in the markets they are competing in. The company uses its strengths and the opportunities in order to fight against potential threats and weaknesses they face due to the lack of huge market share.
Ben & Jerry’s is the leader in the super-premium ice-cream industry. The company is famous for its innovative flavors, unique taste and fancy marketing. Ben & Jerry’s combines an obligation to provide high quality, all natural ice-cream with social and environmental responsibility. This report will analyze the general corporate strategies in order to identify the company’s strengths and weaknesses, its key success factors, the strength of its micro-economic environment and how the expansion in the Japanese market fits into this strategies. Also potential impacts on the company’s strategic vision in light of the acquisition by Unilever will be discussed.
Ben & Jerry’s operates in the highly competitive super-premium ice-cream, frozen yogurt and sorbet business. Generally super-premium ice-cream is characterized by a greater richness and density than other kinds of ice-cream and is therefore sold at a relatively high price. Häagen-Dazs and Dreyer’s Grand Ice-cream Company, which introduced its super-premium ice-cream line in the fall of 1999, are the company’s primary competitors1. Healthy Choice, Nestlé and Starbucks can be mentioned as other significant competitors.
Ben & Jerry's Homemade, Inc. manufacturer of super-premium ice-cream, frozen yogurt and sorbet, was founded in 1978 in a gas station in Burlington, Vermont, by Ben Cohen and Jerry Greenfield with a $12,000 investment. The company is now a leading ice-cream manufacturing company known globally for its innovative flavors and all natural ingredients made from fresh Vermont milk and cream2 with its headquarter still Vermont.
Manufacturing of all Ben & Jerry’s frozen dessert products occurs in the company’s three plants located in Vermont. The company distributes ice-cream, low fat ice-cream, frozen yogurt, sorbet and novelty products nationwide as well as in selected foreign countries in supermarkets, grocery stores, convenience stores, franchised Ben & Jerry's scoop shops, restaurants and other places. Outside of Vermont, the products were distributed primarily through Dreyer’s and later through independent regional ice-cream distributors3 and today through Unilever’s distribution network.
Unilever, a multinational food and personal products company acquired Ben & Jerry’s in spring 2000 (see cnnfn.com article and SEC file in Appendix). The Ben & Jerry's Board of Directors accepted Unilever's offer of $43.60 per share for all of the 8.4 million outstanding shares, valuing the transaction at $326 million4. Under the terms of the agreement, Ben & Jerry's will operate separately from Unilever's current U.S. ice- cream business. There will be an independent Board of Directors, which will focus on providing leadership for Ben & Jerry's social mission and brand integrity. Both co- based in Vermont5.
Ben & Jerry’s adopted a three-part mission statement formalizing the company’s business philosophy. According to the company’s home page, the mission statement is as follows6:
Product Mission: to make, distribute and sell the finest quality all natural ice-cream and related products in a wide variety of innovative flavors made from Vermont dairy products.
Social Mission: to operate the company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community: local, national, and international.
Economic Mission: to operate the company on a sound financial basis of profitable growth, increasing value to our shareholders and creating career opportunities and financial rewards for our employees. Underlying this mission is the determination to seek innovative ways of addressing all three components, while holding a deep respect for employees and the community at large.
Ben & Jerry's corporate strategies attempt to implement the three part of the mission statement described above: developing a high-quality product, achieving economic strategies are focused strategies based primarily on product differentiation (mainly through funky marketing and unique flavors) and a high level of quality in the production process (especially through the use of all natural ingredients). Although focused differentiation strategies target a narrow buyer segment, this strategy helps Ben & Jerry’s to gain a strong competitive advantage as it can offer consumers something they recognize as something different from rival competitors7 - innovative super-premium ice-cream flavors that taste different and consist of all natural, high quality ingredients. In addition to product differentiation from other ice-cream competitors, Ben & Jerry’s General corporate strategies differentiate themselves via several other key success factors such as promoting a company image of social activism, creating customer loyalty and developing creative advertising campaigns.
Several examples show how Ben & Jerry’s implements its corporate strategies. For example, the company donates approximately 7% of pretax profits to philanthropic causes through the Ben & Jerry’s Foundation8. The company also donates free ice- cream during public events and community celebrations - like on this year’s Free Cone Day on April 22, 2002.
Developing customer loyalty is another strategic move to gain a competitive advantage and to prevent that other companies can easily enter the market9. Ben & Jerry’s has made significant efforts to achieve a positive reputation and image with buyers through its frequent promotional campaigns and donations to social foundations (i.e. Ben & Jerry Foundation). One of the most famous marketing events is the Free Cone Day - one day of free Ben & Jerry's scoops. This event was established in 1979 and is now a nationwide annual celebration at Ben & Jerry's scoop shops10. This years celebration was held on April 22 and caused a huge line in front of Ben & Jerry's scoop shop at Horton Plaza.
One way of gaining a competitive advantage is the use of a differentiation strategy to provide a better product for which buyers are willing to pay a higher price. Strange flavor names such as Chubby Hubby, Wavy Gravy, Phish Food, and Chunky Monkey also set Ben & Jerry’s apart from the ice-cream products of rival companies. Also the use of all natural ingredients makes Ben & Jerry's ice-cream unique.
Ben & Jerry’s use of all natural ingredients, high product quality, cyclic introduction of new flavors and the local social image are essential elements of the company’s marketing strategy. The company’s Waterbury ice-cream factory is one of the most
strategy is the use of unusual flavor names and the fancy appearance of their ice-cream pints. Even if they are still number two in the premium ice-cream market they have a strong differentiation to the market leader Häagen-Dazs through their marketing and positioning of their products as “trendy” ice-cream.
The strength of external forces on the ice-cream industry will be shown through Porter’s Five Forces Model of Competition, which is based on the following five factors: rivalry among competing sellers, bargaining power of buyers, bargaining power of suppliers of key inputs, substitute products and potential new entrants to the market.12 Figure 1 summarizes the competitive strength of these forces on the ice-cream industry.
The principal competitors in the super-premium ice-cream industry are large, diversified companies with greater resources than Ben & Jerry’s. The most important competitors are Dreyer’s and Häagen-Dazs. The rivalry can be characterized as intense within the super-premium ice-cream industry, given that numerous competitors exist, the switching costs to rival brands are low for the customers and the tactics to increase sales employed by Ben & Jerry’s main rivals threatens to boost rivals’ volume of production and sales.
The suppliers to the ice-cream industry are dairy farmers, paper container manufacturers, and suppliers of various flavors. Such suppliers are a moderate competitive force, given that the ice-cream industry they are supplying is a key customer and that there are multiple suppliers throughout the nation a producer of ice- cream can choose from. Therefore, the ice-cream suppliers have only moderate power to negotiate prices.
The power of buyers is relatively high because buyers are a large group, consisting of individual customers, supermarkets and restaurants - both nationwide and globally. Since retailers purchase ice-cream products in large quantities, this gives buyers substantial power over negotiating the price. In addition, there are many ice-cream products to choose from, so the switching costs of buyers to competing brands are relatively low. In order to defend against this competitive force, a company’s strategy must include strong product differentiation so that buyers are less able to switch to competing products without suffer large costs.
There are a lot of products in the frozen food industry (pop-stacles, pies, and cake) the consumers can choose from. It is very easy for the buyers to switch to substitute products which is an indicator of the strength of this competitive force. Since substitute products are readily available and lower priced compared to the relatively high priced super-premium ice-cream, the competitive pressures caused by substitute products are strong.
The barriers to entry into the ice-cream industry are moderate due to the brand preferences and customer loyalty for larger and more established rival companies. For smaller more “innovative” companies the barriers are high due to the need of establishing a new taste and brand name. Although Ben Cohen and Jerry Greenfield launched their ice-cream business from a gas station they had to rely on a rival company’s distribution channels which made them dependent on others.
Abbildung in dieser Leseprobe nicht enthalten
Figure 1: Model of the Five Competitive Forces
As shown above, some competitive forces on the ice-cream industry are relatively strong. However, Ben & Jerry’s differentiation strategy makes it possible for the company to defend against these forces and to gain a competitive advantage over their main competitors. The use of higher quality ingredients has created a unique brand image that helps develop customer loyalty. Ben & Jerry’s product differentiation strategy also allows the company to fight against the threats of substitute products that do not have comparable flavors.
The stakeholder concerns over health and nutrition is a strong force on the icecream industry. Sensitive consumer awareness and demand for low-cholesterol or lowfat foods can force companies to respond with ingredient substitutions and differentiated product lines to stay in business. Ben & Jerry’s, introduction of a low-fat ice-cream line brings the company in a better position to attract those consumers who are willing to pay a higher price for healthier products. If this strategic moves works well the company could gain a significant competitive advantage over those companies that resist incorporating socially progressive values into their strategies.
Another tool to analyze strategies of the company is by examining the strengths and weaknesses of its internal resources, and then identifying the external threats and opportunities13. By developing a clear understanding of these factors, one can evaluate where the company should go from here. The following table identifies these forces. As the following table shows, Ben & Jerry’s environmental and corporate strategies are well integrated, and that this integration is crucial to the future success of the company.
Abbildung in dieser Leseprobe nicht enthalten
Key success factors
A successful strategy encompasses the company’s efforts to be competent on all of the industry’s key success factors and to excel on at least one factor14. In the highly competitive super-premium ice-cream industry, the key factors of success are a good distribution network, product differentiation, customer loyalty and unique advertising. As shown in Figure 2, Ben & Jerry’s do extremely well in these key factors, and has good skills on product differentiation to gain a competitive advantage.
1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C., Commission File Number 0-13544 Business description
2 http://lib.benjerry.com/timeline.html, accessed April 21, 2002
4 http://lib.benjerry.com/timeline.html, accessed April 21, 2002 founders will continue to be involved with Ben & Jerry's, and the company will still be
5 http://www.cnnfn.com, accessed April 25, 2002
6 http://www.benjerry.com/mission.htm, accessed March 26, 2002 growth and profitability, and incorporating social activism. The General corporate
7 Thomson and Strickland, Strategic Management, 2001, p.168
8 http://www.hoovers.com/co/capsule/3/0,2163,12763,00.html, accessed April 25, 2002
9 Moore, Writers on Strategy and Strategic Management, 2001 p.43
10 http://lib.benjerry.com/timeline.html, accessed April 21, 2002 popular tourist attraction in Vermont11. Another strength of Ben & Jerry’s marketing
11 http://www.benjerry.com/tourinfo.tmpl, accessed April 21, 2002
12 Moore, Writers on Strategy and Strategic Management, 2001 p.38
13 Thomson and Strickland, Strategic Management, 2001
14 Moore, Writers on Strategy and Strategic Management, 2001, p. 243
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