Ben & Jerry's Homemade, Inc.

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Ben & Jerry's Homemade, Inc.

founded: 1978

Contact Information:

headquarters: 30 community dr.
south burlington, vt 05403-6828 phone: (802)651-9600 fax: (802)651-9646 email: [email protected] url: http://www.benjerry.com

OVERVIEW

Ben & Jerry's manufactures super-premium ice cream, frozen yogurt, sorbet, and ice cream novelties. The company is known for its flavorful ice cream made from fresh Vermont milk and cream, but Ben & Jerry's is also known for its equally colorful names—many of which have been tied to popular culture. For example, some of these include Cherry Garcia (named for the late Jerry Garcia of the band Grateful Dead), Wavy Gravy, Phish Food (named for an alternative band often compared to the Grateful Dead), and Doonsberry Sorbet (named for Garry Trudeau's cartoon). The company meshed ice cream and pop culture and mixed in a healthy amount of planetary and social concern. As of April 1998, Information Resources Inc. estimated that Ben & Jerry's held 3.5 percent of the overall market share for ice cream in the United States.

COMPANY FINANCES

Ben & Jerry's net sales for the first quarter of 1998 increased 15 percent to $41.50 million, compared to $36.10 million for the same period in 1997. Net income totaled $380,000, compared to a net loss of $1.00 million in the first quarter of 1997. The company's earnings per share were $.05 in the first quarter of 1998, compared to a net loss of $0.15 per share in the first quarter of 1997. Improved performance was attributed to a 12-percent increase in sales of domestic pint products—Ben & Jerry's Original Ice Cream accounted for most of the increase. In 1997, Ben & Jerry's earned net sales of $174.20 million, compared to $167.10 million in 1996. Net income for 1997 was $3.89 million, just slightly down from its 1996 net income of $3.92 million. 1997's net sales of $174.20 million showed a steady increase since 1993 when sales totaled $140.30 million and rose in 1994 to $148.80 million, in 1995 to $155.30 million, and again in 1996 to $167.2 million.

Ben & Jerry's stock was hovering between $17 and $20 per share in mid-1998. The price ranged over a 52-week period from $12.00 to $22.75 per share. Also as of mid-1998, Ben & Jerry's had earned $.73 per share for the year. In 1997, earnings per share for the year were $.53, compared to 1996 earnings of $.54 per share.

ANALYSTS' OPINIONS

"Growth has probably been the biggest hurdle for management to deal with," according to a 1992 Smith Barney, Harry Upham and Co. analyst report, "from manufacturing in the old renovated gas station and delivering product from the back of an old station wagon to local stores and restaurants, the company has moved to three facilities in which it produces more than 10.6 million gallons per year." Additionally, the company contracts out another 4 to 6 million gallons and distributes through more than 120 franchised Ben & Jerry's "scoop shops" throughout 20 states. Shops are located in New England, New York, the Mid-Atlantic region, Georgia, Florida, Ohio, Indiana, Illinois, and California.

Impacting Ben & Jerry's financial ratings in mid-1998 were unprecedented price increases for fresh cream—the key ingredient in ice cream. Additionally, the price of butter is used as a benchmark to set prices for fresh cream, and the market price for domestic butter, after steadily declining for a decade, reached historically high levels, rising 50 percent between April and June 1998, according to The Motley Fool's Evening News. Competitor Dreyer's said the current situation could accelerate consolidation in the ice cream industry and had already increased the wholesale price of its own Dreyer's and Edy's brand products in most markets. The stock market showed the impact in industry stock prices—Friendly stock plunged $5 1/4 points to $15 3/8 per share, while Ben & Jerry's lost $2 3/8 to close at $17.00 per share (June 19, 1998). Investment analysts assigned Ben & Jerry's a "hold" rating for the moment.

HISTORY

Ben & Jerry's Homemade, Inc. was started in Vermont. Founders Ben Cohen and Jerry Greenfield first met in a seventh grade gym class in Merrick, Long Island. The two decided, after many odd jobs and exploits, to go into business together in 1978. The pair took a mail-order correspondence course from Penn State University about making ice cream. They scraped together $12,000 and launched Ben & Jerry's, Vermont's Finest Ice Cream and Frozen Yogurt.

The decision to base the company in Vermont occurred after an ice cream parlor opened in Saratoga Springs, New York—the first choice on their location list. Vermont was the only state at the time without a Baskin-Robbins franchise. The store, a renovated gas station in Burlington, Vermont, first opened for business on May 5, 1978. Various intense experimental flavors could be found in the display case. Lore was that the extreme flavorings were a result of Ben's continual allergy and sinus problems. Some of these flavors included Honey Almond Mist, Banana Rum, and Oreo Mint. There were, however, some flavors that didn't quite make it, including Lemon Peppermint Carob Chip, and Honey Apple Raisin Oreo.

According to National Productivity Review, first-year sales reached nearly $180,000—twice the projected sales, yet the venture did not make a profit. They also sold tubs of ice cream at wholesale to restaurants, but Cohen soon realized that supermarkets and grocery stores were an untapped market. Between 1984 and 1990, Ben & Jerry's sales increased from $4.1 million to $77.0 million. Ben & Jerry's Homemade, Inc. went public on October 30, 1985 at $32.50 per share. The company's sales in the early 1990s were "huge"—$97 million in 1991 and $132 million in 1992. Problems with the super-premium ice cream category began in the mid-1990s when consumer attention to health and frugality began to prevail. According to the New York Times, the number of premium ice cream manufacturers were "dwindling."

STRATEGY

Ben & Jerry's strategy consists of making an exemplary product, earning a fair return, and serving the community. The company sought to place its products in markets with large population bases and also where affluent urbanites congregated. These desirable areas include New England, New York, the Mid-Atlantic region, Florida, Texas, the West Coast, metropolitan Chicago, and Denver. According to a 1992 Smith Barney analysis, "The company's marketing strategy has been to focus on innovative, nontraditional methods of promotion and the free advertising it has garnered due to manage-ment's unique commitment to the environment and social responsibility."

The company markets its products through supermarkets, grocery stores, convenience stores, and food service operations. They also market products through licensed, franchised, and company-owned "scoop shops." New CEO Perry Odak, in an attempt to improve marketing, redesigned some of the company's packaging. He removed Ben & Jerry's faces from carton tops and replaced them with pictures better displaying the contents of the ice cream, which were not always obvious from product names (e.g., Chubby Hubby is an ice cream containing chocolate-covered peanut butter-filled pretzels). He also began a $2-million advertising campaign.

During 1998 Ben & Jerry's planned to capitalize on its twentieth year in business, building on momentum gained the previous year. New flavor releases were planned, and the company was building up its advertising schedule and scheduled numerous publicity and product sampling events.

INFLUENCES

Despite all of Ben & Jerry's good intentions, capitalism and philanthropy did not always blend together as well as a pint of one of the company's "smooth" flavors. After less than two years at the helm, Robert Holland resigned as chief executive officer in late 1995. Apparently, Holland had difficulty working within the company principles while turning a profit. Cohen and Greenfield reportedly objected to Holland's planned market expansion into France because of the country's policies on nuclear testing, as well as his entrance into the sorbet market, citing that the frozen dessert diminished one of the chief missions of Ben & Jerry's—helping Vermont's dairy farmers. Perry Odak, previously chief operating officer of U.S. Repeating Arms Co., was hired by Ben & Jerry's in January 1997 to run the company after Holland's departure.

FAST FACTS: About Ben & Jerry's Homemade, Inc.

Ownership: Ben & Jerry's is a publicly owned company traded on NASDAQ.

Ticker symbol: BJICA

Officers: Perry D. Odak, Pres. & CEO, 52, $400,000; Ben Cohen, Chairperson & Founder, 46, $183,333; Jerry Greenfield, Vice-Chairperson & Founder, 46, $183,333; Frances Rathke, CFO & Secretary, 37, $207,603

Employees: 736 (1997)

Chief Competitors: As a manufacturer and marketer of premium ice cream, Ben & Jerry's primary competitors include: Dreyer's; Friendly; Haagen-Dazs; Portofino; and Starbucks.

CURRENT TRENDS

In the late 1990s, Ben & Jerry's found itself correcting past mistakes that had negatively impacted the company's financial performance and resulted in a major net loss for the company in 1994. New CEO Perry Odak was responsible for implementing many of the changes, which were based on applying practical business principles while still retaining the company's "funky" personality. And as reported by The New York Times, "Those fearing a sellout, however, should ponder this: Tightening the company's business practices is not only improving the bottom line, but also seems to be promoting worthy causes." Odak took the heat for removing sagging products with devoted fans—such as Peace Pops and Brownie Bars—that were costing the company money. New novelties were introduced, including ice cream on a stick and the Phish Stick. The company also established an alliance with Paul Newman and agreed to manufacture Newman's Own ice cream—Paul Newman donates all proceeds he receives from the sale of these products to charitable and educational purposes.

PRODUCTS

In 1991 Chocolate Chip Cookie Dough sales made Ben & Jerry's number one selling flavor. Also that same year, market testing of eight flavors in the frozen yogurt line was started—sales were kicked off in January 1992. Experimentation with flavors was ongoing and, in the mid-1990s, the company actively sought the help of consumers for new product ideas, one of which resulted in "Cool Britannia"—a flavor suggested by U.K. customers for sale in the United States. Other new flavors included Dilbert's World Totally Nuts, Coconut Cream Pie low fat ice cream, Chocolate Cherry Garcia frozen yogurt, and S'mores low fat ice cream. In 1997 Ben & Jerry's Homemade, Inc. listed more than 50 flavors of ice cream, frozen yogurt, low fat ice cream, and sorbet. About 34 of the flavors are packaged and sold in grocery stores, while the rest are only available in Ben & Jerry's Scoop Shops and for sale to restaurants. In the first quarter of 1998, 14 new products were introduced. The company also sells individual ice cream novelties, such as Ben & Jerry's ice cream on a stick.

CORPORATE CITIZENSHIP

Ben & Jerry's is well known as a company with a serious dedication to corporate responsibility in Vermont, the United States, and around the world. The company gives away 7.5 percent of its pre-tax earnings through the Ben & Jerry's Foundation, employee Community Action Teams, and corporate grants. This concept is called "linked prosperity." The company was awarded America's Corporate Conscience Award for Charitable Giving in 1988 and, that same year, Greenfield and Cohen were named U.S. Small Business Persons of the Year. The company's Ben & Jerry's Foundation supports numerous organizations such as the Citizens Committee for Children of New York, the Environmental Health Coalition, Native American Community Board, Business Partnership for Peace, and other organizations around the United States and the world. It specifically considers proposals relating to children and families, disadvantaged groups, and the environment. All creator royalties from sales of Doonsberry, a blueberry and raspberry fruit sorbet (licensed by Gary Trudeau and Universal Press Syndicate Inc.) are returned to various nonprofit organizations. Phish, Inc.'s shares of the proceeds from ice cream sales goes to environmental efforts in the Lake Champion Region of Vermont.

CHRONOLOGY: Key Dates for Ben & Jerry's Homemade, Inc.

1978:: Ben Cohen and Jerry Greenfield found Ben & Jerry's
1979:: Ben & Jerry's market expands to include grocery stores and restaurants
1981:: The first franchised Ben & Jerry's Scoop Shop opens; Time magazine declares their ice cream "the best in the world"
1984:: The company goes public
1985:: Cohen and Greenfield start the Ben & Jerry Foundation non-profit charity and grant firm
1988:: Cohen and Greenfield are given the Corporate Giving Award
1994:: Jerry Greenfield steps down as CEO; company looks for a replacement by way of an essay contest: "Why I would be a great CEO for Ben & Jerry's" in 100 words or less

Founder Ben Cohen clearly articulated this policy in the company's 1990 Annual Report. "The most amazing thing is that our social values—that part of our company mission statement that calls us to use our power as a business to improve the quality of life in our local, national and international communities—have actually helped us to become a stable, profitable, high growth company. This is especially interesting because it flies in the face of those business theorists who state that publicly held corporations cannot make a profit and help the community at the same time, and moreover that such companies have no business trying to do so. The wonderful thing is that despite Ben & Jerry's avowedly and unabashedly populist leanings, you, our shareholders, continue to support us. I am proud to say that the employees of Ben & Jerry's are finding ways to help make money and help people at the same time. Once you start figuring out how to put these things together, the old way just doesn't make sense anymore."

On a basic corporate level, Ben & Jerry's created a more environmentally friendly carton (made of un-bleached paper) for its products—the company is expected to start using it in 1998. The company also had a corporate goal of reducing solid waste by 25 percent.

GLOBAL PRESENCE

In 1988 Ben & Jerry's reported the opening of franchised scoop shops in Canada and licensed scoop shops in Israel. While the market in Canada had been slowly growing, the number of Scoop Shops in Israel increased steadily to 14. The company also had a joint venture in Russia called Iceverks, through which it opened four scoop shops in 1992. Early in 1995 Ben and Jerry's set up an international department and began exploring other markets. They planned to open shops in many European and Asian countries. The company began distribution in the United Kingdom in 1994. In 1998, Ben & Jerry's launched operations in Japan, which contributed to the company's improved financial performance. The company also opened three company-owned scoop shops in Paris.

EMPLOYMENT

Ben & Jerry's is continually cited as an example of one of the more progressive companies for which to work in the United States, particularly because of its clearly articulated corporate policies on a wide array of work-place issues. The company was listed in Working Mother's "100 Best Companies for Working Mothers" and also in "The 100 Best Companies to Work for in America"—and not only because of the three, free pints of ice cream allotted each employee on a daily basis, either. In 1990 the highest paid employee, for example, was not able to earn more than seven times the salary of the lowest paid employee. Originally, the ratio had been 5-to-1, but concerns were that the company would be ineffective in courting qualified management in its search for a chief executive officer.

The company makes special efforts to recruit both women and minorities. About 50 percent of Ben & Jerry's senior managers and professional staff are women, including the company's chief financial officer. The company said it made "special efforts to recruit minorities from out of state," due to "the very low number of minorities in the Vermont population."

A FREE PLANE TICKET (OH, AND ICE CREAM TOO)

When Ben & Jerry's decided to launch a new ice cream flavor named after the comic strip hero Dilbert, they did it in a way that would have made Dilbert proud.

In an effort to introduce their new flavor, "Dilbert's World - Totally Nuts" in a way that was as unique as the flavor of the ice cream, Ben & Jerry's played an April Fool's Day joke on business commuters on select United Airlines flights from New York LaGuardia and Los Angeles International Airports. On April 1, 1998, Ben & Jerry's gave actual airline employees a break from their hectic schedules by teaming up with United Airlines and setting up Dilbert-like office cubicles in the airports. A few lucky and unsuspecting travelers were the targets of the prank.

As passengers checked in at their gates, they were given free samples of the new flavor, as well as a check for the average price of their ticket. Although April Fool's is a day best known for practical jokes, this was no joke. The checks were real and, oh, the ice cream wasn't bad either! It was certainly an off-the-wall April Fool's Day in true Dilbert fashion!

In addition to a routine array of health and dental coverage, profit sharing, 401K, and other traditional benefits, the company extends its health benefits to same-sex partners. The company also provides up to six weeks of paid leave to all new mothers, including adoptive mothers; fathers are given two weeks of paid paternity leave, with up to 10 weeks unpaid leave. Ben & Jerry's also offers child care benefits and special working arrangements for new mothers, including a "phased return to work" program. And, as an added bonus, the company has a free fitness membership program, "which helps offset the three free pints of ice cream a day available to employees."

SOURCES OF INFORMATION

Bibliography

ben & jerry's home page, 21 june 1998. available at http://www.benjerry.com.

"ben & jerry's homemade inc." moody's investor service, 9 january 1997.

"Ben & Jerry's Homemade, Inc. Announces 1997 Fourth Quarter and Year End Results." Ben & Jerry's Press Release, 27 January 1998.

"Ben & Jerry's Homemade, Inc. Announces 1998 First Quarter Results." Ben & Jerry's Press Release, 20 April 1998.

"BJICA." The Motley Fool Evening News, 19 June 1998.

De Lucia, M. J. "Ben & Jerry's Homemade Inc. Company Report." Tucker Anthony and R.L. Day, 22 July 1991.

Hays, Constance L. "Getting Serious at Ben & Jerry's." The New York Times, 22 May 1998.

"High-Caliber Help for Ben & Jerry's." Time, 13 January 1997.

Hitchner, Earl. "We All Scream for Ice Cream." National Productivity Review, Winter 1994.

Lewis, Len. "A Cold World." Progressive Grocer, November 1996.

Morrow, R.B. "Ben & Jerry's Homemade Inc. Company Report." Smith Barney, Harris Upham and Co., 8 December 1992.

Serwer, Andrew E. "Ben & Jerry's: Corporate Orge(sic)." Fortune, 10 July 1995.

For an annual report:

on the Internet at: http://www.benjerry.com/fin/index.html#annualsor write: Investor Relations, Ben & Jerry's Homemade, Inc., 30 Community Dr., South Burlington, VT 05403-6828