EXECUTIVE SUMMARY
Ben and Jerry’s Homemade Inc. (B&J) is a prominent participant in the US ice cream market since it is one of the two major players. Ben Cohen and Jerry Greenfield’s B&J made a lot of money in the 1980s. Frozen yogurt is a big business in the United States, although the most popular stores have just a little slice of the pie. In 2010, Ben & Jerry’s Homemade had a market share of 8.7% in the United States, with sales of 477.1 million dollars. One of the company’s most well-known brands is Ben & Jerry’s. Product quality, social media marketing, employee happiness, and overall financial health are all important aspects in the company’s growth. At the same time, the company suffers from excessive selling expenses, bad policies for distributors/suppliers, and a lack of worldwide emphasis. After more than two decades as an independent firm, Ben & Jerry’s became a completely owned subsidiary of Unilever. According to financial ratios and liquidity, the current crisis is merely a blip.
While the American economy is faltering and ice cream market demand is reducing, B&J’s highly unique product with a luxurious feel is less affected. Alternatively, the company faces the threat of lagging behind more aggressive competitors. If it wants to stay on top of the market, it will have to cut its costs, go worldwide, and get bigger locally. This business strategy aims to help Ben-Jerry get a significant part of the market and maximize profits in its sector. It will do so by identifying and presenting the best options. Study findings suggest that Ben and Jerry should work to maintain their current market position, raise demand on both the domestic and worldwide markets, and reduce production costs all at the same time.
INTRODUCTION
Ice cream “Until 1800, ice cream was a rare and exotic delicacy eaten only by the affluent,” says the International Dairy Foods Association. As a pioneer of contemporary corporate social responsibility, Ben & Jerry’s founded its first ice cream shop in Vermont in 1978 and has been recognized as such ever since. Since its inception, Ben Cohen and Jerry Greenfield have defined how firms might behave socially and ethically responsible. Many of Ben & Jerry’s business methods are aligned with their three primary missions: social, product, and financial. Three men throughout history have used ice cream to protest against social injustice: After Ben Cohen and Jerry Greenfield completed the 5-dollar ice cream manufacturing correspondence school, they founded Ben and Jerry’s super-premium ice cream firm and began caring capitalism, ending the ice cream elite.
The terms “corporate social responsibility” (CSR), “corporate social performance,” “corporate social responsiveness,” and “corporate citizenship” all have a lengthy history. There is a great deal of debate when it comes to what businesses may and can’t do. Historically, the only role of for-profit company directors and executives has been to increase the company’s value for its owners. Social responsibility (beyond compliance with all existing laws) as a secondary or even equal obligation has consequences for many elements of a company’s operation. There must be a shift in mission, KPIs and management practices if corporate social responsibility is taken seriously. Ben & Jerry’s has been a lightning rod for controversy for decades, even though ice cream is a widely beloved treat. The dispute over whether Ben & Jerry’s is a model business, or a feel-good (and undoubtedly taste-good) fiduciary forgery is as heated as the consumer discussion over whether New York Big Fudge Chunk or American Dream is the most excellent flavor.
An Executive pay cap was one of the earliest and most well-known moves Ben and Jerry made to distinguish their firm from other for-profit organizations. Despite dropping the cap, Ben & Jerry’s has endured as a socially engaged and financially successful company. Our recommended strategy study for B&J is followed by examining the company’s internal and external environments. Next, the rationale for this decision is laid out. This proposal’s implementation plan includes the project’s expected financial and non-financial outcomes. Section 7 outlines the anticipated effects of these measures. The research group will provide final suggestions for pre- and post-investment strategies.
Mission
Ben & Jerry’s mission is to manufacture of great ice cream because it is great ice cream, and that is why it is the Product’s Mission. It is our mission to provide customers with the greatest quality ice cream and other mind-altering euphoric concoctions while adhering to sustainable business methods that respect the Earth and its natural resources.
Problem statement
When it comes to Ben & Jerry’s activism and the costs of philanthropy, the company’s shareholders have to be taken into consideration. Profit maximization is often sacrificed in favor of the company’s founding social, environmental and product beliefs. Unilever’s shareholders and management could be at risk as a result of this. The costs of the running of the business promoting the strategy of making quality of the ice cream makes the expenditures to be too high. Too high expenditures reduce the capitalization part of the business and also reduce the expected profits. This is the main challenge face by the corporation Ben-jerry ice cream producer.
According to Davies, businesses have a relationship with their communities and that businesses can use their power to influence social change (1960). “Corporate constitutionalism,” which he helped to popularize, is the belief that corporations have an influence on society and that power plays a role in these interactions. A company’s legitimacy and long-term viability will be compromised if it does not fulfill its socially responsible obligations, according to his logic.
In order to achieve Ben & Jerry’s CSR goals while increasing profits, the corporation must find a way to do both. Ben & Jerry’s may have been in a better position to achieve its social missions after the acquisition of Unilever. With the help of global Unilever operations and expansion plans, the company’s communication, resources, and visibility have improved. Businesses now wield more economic and social influence than certain governments because of globalization, deregulation, lobbying, and technological advancement. This thesis is especially applicable today. Alternatively, there is an instrumental theory that sees wealth development as a strategic goal. “The sole obligation of business towards society is to maximize profits to shareholders within the legal framework and ethical customs [of a nation],” according to Friedman’s (1970) thesis. According to Adam Smith’s concept of the invisible hand, in a free market, economic agents who pursue their own interests benefit society.
Analysis
Financial expenditures are a problem for the corporation, on the other hand, because of its business practices. To better understand this problem, we’ve divided it into three parts: excessive costs inside the corporation, fierce rivalry in the market, and a weakening of Ben & Jerry brand. The SWOT analyses assess Ben & Jerry’s market circumstances.
Strengths
- Reputation for quality
Since the product itself plays such an important role in the proposed strategy, it is essential that it is of high quality. The firm’s concentration on natural ingredients, as well as its usage of the trademark “Homemade,” help to form and retain its customers’ view of the company. Innovative and intriguing flavor combinations are always being developed by the company’s research and development department (R&D). Despite the fact that the barrier to copying is very low3, this aids in the development of competitive advantage in order to stay up with the competition.
- Social Marketing
The firm has gained the trust of a generation of socially aware “baby boomers,” as well as saving a significant amount of money by providing free media coverage of social events and activities, among other benefits.
- The level of employee happiness
In order to maintain a low turnover rate of 12 percent, the company prioritizes employee happiness. A low employee turnover rate has an impact on the effectiveness of training, training costs, and employee commitment. More experienced workers are more likely to have a better understanding of the production process and to offer suggestions for improvements. The company’s reputation as a great place to work gets a boost when turnover drops. As a result, the company has a wider selection of potential employees from which to choose.
- Low gearing ratio
Debt to total assets ratio of 27% in 2016 provides B&J with a solid foundation for future investments and expansion.
Weakness
- Structure with a high unit cost
Ben& Jerry’s high-cost structure is mostly owing to the company’s labor-intensive manufacturing, high salaries, and its supplier strategy. According to the research, it’s unclear how much of the expenditures may be attributed to labor or excessive administrative costs.
A single distributor is also employed by the firm. As a result, the firm loses control of its distribution channels in the event of the loss of this distributor. To keep up with the competition, cost containment will become more important.
- Low shareholder value
This has happened as a result of the absence of dividends. The fact that the “Principal Stockholders”8 own 48 percent of the company’s shares may not alarm potential investors, but the lack of a reasonable rate of return on investment may. Due to a lack of investment, the firm may be at a competitive disadvantage when compared to its main competition, who has greater resources.
- Lack of foreign experience
It has been tried, but the corporation does not leverage all of its worldwide potential despite attempts to increase business in the United Kingdom, Israel, and Russia The initiative to market the B&J ice cream brand through eateries is a step in the correct approach in that sector.
- Position of the company currently
Despite the fact that the company had its first yearly loss in 1994, it is now in good financial standing. The study committee concludes that the loss in 1994 was mostly driven by a small number of “one-off” incidents in the campaign. The asset write-downs of $6.8 million account for a considerable portion of the total debt. An inaccurate valuation was made of the St. Albans facility, requiring a complete redesign of the software system that was responsible for the blunder. Expenses for further advertising and introduction were expended the following year as a result of the debut of the “Smooth, No Chunks” line. The company’s excellent liquidity ($20 million1) and low debt-to-assets ratio demonstrate the company’s ability to make more investments and/or grow abroad in the future. Furthermore, when compared to industry norms, the company’s track record of success is a strong supporter of this claim.
Following a thorough assessment of the facts and figures supplied, research indicates that B&J has a strong market position and is capable of generating long-term profits in the future.
Opportunities
There is still a long way to go before the nonfat (Sorbet) ice cream business in the United States and the ultra premium ice cream market in Europe can be considered mature markets. In Europe, Haagen-Dazs enjoys a first-come, first served advantage. However, there is still a lack of very premium ice cream on the European and Asian markets. Additionally, new distribution avenues might be opened up.13 By increasing their production capacity, B&J will be able to regain control of their own operations and boost output at their manufacturing plants. It’s not evident from the statistics whether B&J is well-represented in US supermarkets. If this is the case, the market has room to expand much more.
The new CEO, Holland, has a proven track record of increasing the performance of businesses15. There’s a chance this will come in handy for the business down the road.
Threats
The broader economic downturn in the United States has already had an effect on ultra premium ice cream sales. The primary rival has already moved into Europe and Asia in order to increase its market share in those areas. The company faces the prospect of being trapped on a stagnating American market and losing momentum in Europe’s fast-rising industry if nothing is done to address the situation.
The general people is becoming more aware of the need of keeping a healthy lifestyle. As a consequence of this limitation, sales of high-fat ice cream may be adversely affected.
Dietrich Dreyer, Dreyer’s exclusive distributor and ice cream manufacturer, has the support of Nestle, the world’s biggest food conglomerate. It is probable that Dreyer’s may enter the market for super-premium ice cream, which might represent a challenge to B&J, particularly given that B&J is reliant on this one lone distributor.
Options of the company recommendations
The organization has an enormous number of alternatives in terms of possibilities. It is possible to separate the alternatives into two categories: domestic and international. Both expanding into new markets and staying in the local market are viable possibilities for a business’s international growth, but each has its own advantages and disadvantages, so it’s important for a firm to weigh its options carefully. Other assessments of the company’s internal operations will be required. It is still possible to reduce the cost of sales in order to improve the competitive position of the company. The information provided gives no indication of the breakdown of sales costs or the structure of administrative expenses of the company in question. This raises a lot of red flags. It’s possible to get into greater detail on labor expenses if required.
According to the company’s leadership, labor costs account for a significant portion of its total cost structure. For example, the company might use cost-cutting measures to lower these costs. Reducing the wages would be one of the cost cutting solutions to the company. The industry may avoid to increase the wages until it increases the sales. The workforce may stay constant as the company is inplimenting more labor effivcient production methods. Reduce working time in the industry but still maintain the market demand production.
On the sales side of the production, more emphasis could be made on expansition or withdrawal from specialty flavours. Increasing demand for high-fat flavours will increase cost effective production.
Proposed Strategy – implementation
If you want to maintain your current market share, you must do everything possible to increase demand for your product. Smart internal and external changes may be able to ease B&J’s high cost structure. B&J should use its R&D, sophisticated manufacturing facility, and strong brand image in the long run to become the market leader in its industry. In order to grab a larger share of the market, B&J must raise marketing spending while also improving product quality and generating new preferences. B&J is always on the defense in the face of its competitors.
Social responsibility
“We were searching for our neighbors to ‘get a scoop of the action,'” Cohen said, with the hope of converting them into co-owners and seeing them thrive alongside the company. Like an early-stage crowdfunding campaign, they set a $125 minimum purchase price and raised far more money than expected. After a few years, they set up a foundation to receive 7.5 percent of Ben & Jerry’s pre-tax profits and donate the money to charitable causes. Grant requests increased the number of unmet human needs. When they discussed it, they wondered why not all businesses were making an effort to improve the quality of life for their customers. A “spiritual component” exists in business, Cohen explains. “Jerry and I realized that.”
Business has overtaken both religion and government as the most powerful force in our society, according to the authors. Companies, they believe, operate solely to benefit themselves rather than to improve society as a whole. This year, Ben & Jerry’s expanded the definition of their bottom line to include both profits and improvements made to the lives of those living in the neighborhood. As Cohen said, “Once you adjust your thinking, the potential for integrating the two are almost unlimited.” “Money has the potential to be the source of all opportunity.” Ben & Jerry’s social responsibility advocacy is evident in the ingredients they use, which are sourced from fair-trade sources. They get their coffee directly from a cooperative in Mexico, as well as wild blueberries gathered by a tribe in Maine. The Brazil nuts that are utilized in their jungle crunch are sourced ethically and sustainably. The brownies in one flavor are obtained from a Bronx bakery that employs formerly incarcerated and drug-dependent individuals
Ben & Jerry’s runs franchised ice cream stores, however franchisee costs are waived for shops operated by nonprofit social service organizations, such as those that provide job training to at-risk adolescents. Also distinct from Unilever’s control is the fact that Ben & Jerry’s is governed by its own board of directors. This board is self-electing, and it will continue to exist in perpetuity. It serves as a watchdog and has the legal ability to veto suggestions that might lower the quality of the product or undermine the social objective. As sales grow, it is necessary to expand investment in the social purpose as well. Being recognized as socially responsible addresses the demands of a different group of clients. “It creates great customer loyalty.” says the author. We build a link with customers based on ideals that we both share. According to Greenfield, “it helps us distinguish our goods, inspires our staff, and provides a distinct selling point.” “It assists us in our recruitment efforts.”
After selling their firm to Unilever 15 years ago, Ben & Jerry’s continues to work there, but without any responsibility and without any control. They tour the country advocating social responsibility, despite the fact that many feel that the most essential thing a corporation can do is to provide quality jobs and, secondly, to support community causes. Cohen noted that the voice of business is the most powerful tool accessible to it, but he expressed sadness that many major corporations exploit that voice simply for their personal profit. As they transitioned into revival-preacher mode, Cohen and Greenfield invited the crowd to raise their hands in favor of a constitutional amendment that would remove corporations and their contributions from the political process. Many others were moved by the evangelical spirit and raised their hands before reaching out to those holding out their palms for free ice cream.
Stakeholders affected by the recommendations
Unilever does not have a representative on the board of directors of Ben & Jerry’s. Its members elect them, and the board continues to exist forever after being chosen by the members. Planned changes that might jeopardize product quality or social responsibility will be rejected by the monitoring organization. Increases in money need an increase in commitment to social purposes.
- Employees
Employees are stakeholders in Ben and Jerry, and they directly affect the business performance. Employees are very significant in the needs of a business. For the employees, they need compensation, payments, and a sense of purpose as more as career development opportunities. Harsh working conditions and low wages would be an effect that the workers face as the firm expenditure reduction cost recommendations may affect them.
- Customers
Customers are the company’s revenue givers from purchasing the ice cream produced by the Ben-Jerry co-produces. The company products are very important to the customers who value the brand. The recommendations may realize the company arrives at cost-effective measures that will make the business grow its brands with reduced costs. Affordability will be essential to the customers as they prefer the brand. The image of the company will grow as the recommendations will be of very importance to the company. The recommendations of the stakeholders will affect the ethics as the management may be over authoritative and ethics in quality assurance maybe not be assured.
Conclusion
According to the study team, there are no companies that are able to maintain their position on the route to success and profitability despite the obstacles they face. A certain amount of temporary loss must be expected when making large-scale financial commitments. Ben & Jerry’s is still the undisputed leader in the ultra-premium ice cream market. The research organization believes that the investor should have confidence in the company’s future growth before continuing to invest. The company has the ability to grow further after making the strategy grow with the aim of brand recognition. The company will be able to achieve its intended customer satisfaction as well as maintain a good public image with the reduction of the CEOs cap. The result would be effective as the total reduction of cost will be on the expenditure from the highly paid individuals. The employees will still receive the normal pay’s there will be no ethical dilemmas arising from the taking of the recommendations. Ben and Jerry is expected to rise above its competitors and has more outlets in the globe as the company’s corporate social responsibility strategy will help it brand its image.
References
2016 SEAR report | Ben & Jerry’s. (n.d.). https://www.benjerry.com. https://www.benjerry.com/about-us/sear-reports/2016-sear-report
Archie B. Carroll, Jill A. Brown, A. V. (2018). Corporate Social Responsibility: A Review of Current Concepts, Research, and Issues. Corporate Social Responsibility, 2-12. https://www.emerald.com/insight/content/doi/10.1108/S2514-175920180000002002/full/html
Ben and Jerry’s case study example. (2021, October 6). GraduateWay. https://graduateway.com/ben-and-jerrys-case-study
Pellegrin, K. L. (2016). Ben & Jerry’s CEO Pay Cap and Corporate Social Responsibility: Sweet Justice or Frozen Fiduciary? SAGE Publications: SAGE Business Cases Originals. http://sk.sagepub.com/cases/ben-jerrys-ceo-pay-cap-and-corporate-social-responsibility
Steimer, S. (2017). How Ben & Jerry’s took both its ice cream and mission global. Accessed October, 15.
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