Ben and Jerry’s marketing strategies Essay Example
Ben and Jerry’s marketing strategies Essay Example

Ben and Jerry’s marketing strategies Essay Example

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  • Pages: 18 (4807 words)
  • Published: February 19, 2019
  • Type: Case Study
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Ben and Jerry's marketing strategies Ben ; Jerrys were experiencing a steady growth within their sales figures from 1990 to 1993. However, In March 1994, the Cost of Sales increased approximately $9.6 million or 9.5% over the same period in 1993, and the overall gross profit as a percentage of net sales decreased from 28.6% in 1993 to 26.2% in 1994. This loss might have been a result of several reasons, such as high administration and selling costs, a negative impact of inventory management, and start-up costs associated with certain flavors of the new Smooth, No Chunks ice cream line. Ben ; Jerrys selling, general and administrative expenses increased approximately 28% to $36.3 million in 1994 from $28.3 million in 1993 and increased as a percentage of net sales to 24.4% in 1994 from 20.2% in 1993.

This increase might reflect the increa

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se in marketing and selling expenses and the increase in the company's administrative infrastructure. Ben; Jerry's loss was not solely due to their employee-orientated approach, but they appeared to have taken out a vast amount of capital lease in their aim to automate their production to keep up with the intense competition. As reflected in the balance sheet, Ben; Jerry's had reinvested huge amounts of property and equipment in 1994 increasing their long-term debts by almost 45% in 1993. Alternatives available to the consumer now, and in the foreseeable future Haagen Dazs is currently the main competitor in the concentrated marketplace for super premium ice cream. Substitutes are however available. There are other ice creams not in the super premium category.

To an extent, these are real competitors. However for the market B;J caters fo

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{the up market 25-40s with a high disposable income} their strategies should not have a great impact on B;J. The frozen yogurt lines which B;J now provides, has a number of direct competitors to deal with. Dealing with other substitutes is not that simple. Expensive (or not) chocolate, cakes, croissants and other post meal consumables are realistic options for the consumer. Ferrara Rocha will assure you that their product is the perfect accompaniment to any meal. B;J need to be wary of this. How he/she makes the choice for ice cream (as opposed to chocolate etc.) and then super premium (as opposed to premium or ordinary) and then B;J (as opposed to Haagen Dazs etc.) is essential. See section 3.21 Research The possibility of a rival ceasing B;J's place as no.1 or no.2 in the marketplace? Despite after tax losses in 94 both B;J and Haagan had a 42% share in early 95. None at present seem to have the ability or financial backing to challenge this, albeit Edys has Nestle. The possibility of new entrants in the market place is confined by two major problems. The brand and distribution. Remembering that these are up market consumers where by cheap alternatives are not necessarily sought for then the key element is the brand. This brand and the associated image are something currently only Haagan and B;J have. This emotional tie related to

B;J's and everything it possesses beyond what it is in itself (i.e. a good tasting ice cream) is something that will be difficult to emulate. It is a question of I wouldn't be seen dead eating another ice cream as opposed to this is

cheaper and tastes just like B;J's so Ill buy this from now on. The other barrier concerns distribution. With ice cream the idea of selling products through the Internet, despite the dried ice, which may accompany it, is not likely to be an option V the consumers will not readily enthuse over the idea. B;J's is a fresh ice cream and by nature difficult to transport. Consequently distribution to stores around the USA and globally will be expensive and require partners such as Dreyer's that have an extensive transportation network. It must be noted that this is potentially a concern or risk for B;J's.

Having a rival manufacturer distributing their ice cream is likely to cause conflict, and B;J should change this immediately or have an adequate contingency plan . With both the above barriers the key entrants may be the other ice cream manufacturers in the premium or ordinary market, notably the premium. As it is these that already have the distribution network as well as the know how. It will still take a large investment for these manufacturers to sell their image. Internal Issues Due to the baby boom in 1994 the target market of Ben ; Jerry has declined vastly. Although Ben ; Jerry still hold a large percentage of the small market share, the company needs to decide on whether this target segment is worth sticking with. At one stage Ben ; Jerry's pricing strategy worked really well, however it has become evident that demand over recent years has shifted towards lower priced products leaving pricing strategies being a big issue for the company. Until 1994 all of Ben ; Jerry's promotions

were gained through the companys socially conscious practices.

However price wars with main competitors left the company having to pull funds off advertising campaigns to fund price discounts and store coupons. Due to the fact that imitations for the product are being developed more rapidly, Ben ; Jerry have changed their primary marketing goal to establish products that cannot be imitated but the technological developments of the company have not allowed them to launch the products within a realistic time limit. B;J's mission statement includes the need, quite rightly, for a wide variety of innovative flavors. Five years to find the perfect coffee bean seems unnecessary. Coffee ice cream, in this period, may have become unattractive to the customer. What if after this period the product failed to penetrate the market? This scenario is compounded by, - The quick replication by competitors - The high costs related to manufacturing each different flavor As a result it is key to cease brands not received well, as well as introducing new flavors quickly. Flavor of the month may be a way of bringing consumers to them on a regular basis.

To identify what the consumer wants and cannot receive elsewhere, what he/she detests and what they would like to improve is important. Although there are some signs of B;J carrying out consumer research it is essential to introduce continual focus groups or panels. It may be the case that a good ice cream is not selling well due to expense, lack of marketing or its just too different to comprehend trying. Research will be key in identifying the market in any region or country B;J wishes to operate, especially

into consumers needs and wants. The way choices are made needs to be understood and the positioning of B;J needs to accommodate this. The decision is based, amongst others, by the mood of the potential consumer at the time of the decision, the tastes of the accompanying friends V group decisions are likely to be an integral element, convenience of supply and time available. Ben ; Jerry seem to be proud of the success rate of their relaxed, casual culture and having employees involved in the decision making. However this policy needs to be reviewed as decisions are taking too long to be made due to large staffing numbers but with staff turnover at a low twelve percent, changing the decision-making process could be very difficult. If it is not bad enough that the company is loosing market share, the company putting more funds into promoting their image than to them is irritating shareholders even more.

A happy medium will have to be found for Ben ; Jerry to gain confidence back from their investors. The extent of internal rivalry amongst the established firms within the industry. Ben ; Jerry exist in a consolidated marketplace with just two major players. The other is Haagen-Dazs. There is severe competition between the 2 players. If this rivalry is weak then companies have an opportunity to raise prices and earn greater profits. However, if rivalry is strong significant price competition including price wars can occur. Price competition limits profitability by reducing the margins that can be earned on sales, which could push the industry profits down in the process. Ben ; Jerry's competitive structure seems to be consolidated. The

more commodities like an industry product the more vicious will be the price war. The nature and intensity of rivalry in their industry is much more difficult to predict. As the companies are interdependent competitive actions of one company will directly effect the profitability of others.

Companies sometimes seek to reduce this (price war) by following the price lead set by the dominant company in the industry. The demand conditions also affect the intensity of internal rivalry between companies. Growing demand tends to reduce rivalry as companies can sell more without taking market share away from other companies, resulting in high profits. Conversely declining demand results in more rivalry as companies fight to maintain revenues and market share. Therefore Ben ; Jerry exist in a mature industry where there is declining demand; creating intense rivalry with Haagen Dazs. Buyers Ben ; Jerry's customers have no switching costs. Therefore Ben ; Jerry have to be aware of upcoming price wars, to avoid losing customers to their rival. Hence Ben ; Jerry's customers have high bargaining power. For example, during economic instability consumers are reluctant to spend their money on luxury products such as super premium ice creams.

How much power can a supplier have? Ben ; Jerry's Supplier of milk and cream comes from Vermont Dairy farms which charge a higher price but do not use any genetically engineered drugs (rBGH). Their supplier of milk has increased bargaining power as a direct result of Ben ; Jerry's principals, which in this case is, "h Health issues. "h To protect smaller farms. Most of their suppliers are scattered around the world such as, "h South African rain forest, which

supply Nuts. "h Passamaquoddy Indians, which supply their Blueberry. "h Georgia, which supply their peaches. High costs in transportation and research are inevitable. The coffee beans used in their coffee-flavored ice cream took the company five years to find; therefore one can imagine the high costs involved. Ben & Jerry also put money pack into the suppliers.

This in turn establishes strong relations between company and supplier; for example the brownies used in their Chocolate Fudge Brownie Ice Cream are purchased from bakeries, which employ under skilled workers. Doing so gives the supplier greater comfort and reassurance with better bargaining power, why? Because Ben & Jerry prefer to select their suppliers who have greater social morals. What Social and Economic Factors affected B&J? In 1994, sales were flat, profits were down, and the company's stock prices had fallen to half its value. While Ben ; Jerry had thrived in the 1980s, the coming of the baby boom in the 1990s meant a middle class society that was more health conscious {the target market which Ben ; Jerry gained much success on}. The company realizing its fall in sales quickly responded to the changes in consumer demands and introduced Ben ; Jerry Lite. This line failed miserably. It seems like that Ben ;

Jerry failed to forecast and acknowledge the changing in consumer tastes, and was faced with increasing competition with Haagen-Dazs, which introduced its low-fat Ultra Premium ice-cream. Their social commitments to their customers community and suppliers have contributed to a successful and unique image, Ben ; Jerry donated a portion of their sales from their Rainforest Crunch Ice Cream back into environmental preservation causes in South

America. Ben ; Jerry also established the Ben ; Jerry Foundation, which donated 7.5% of its pre-tax profits helping non-profit organization, such as, "h An establishment in New York to help drug addicted pregnant women. "h Individuals and families affected by the AIDS virus in Brattleboro. Such efforts had contributed to winning over like-minded consumers, however its arguable to what extent this will have on winning the hearts of international consumers.

The question then arises, to what extent does their social unique image affect their consumer behavior? Swot Analysis for Ben ; Jerry Strengths "h Ben ; Jerry have an established and recognized brand name. "h They have a relaxed, loyal and casual workforce. "h Good public and social image due to their principles in social awareness. "h Wide variety of flavors in ice cream for customers. Weaknesses "h Ben ; Jerry have a limited target market, as their product is niche. "h The suppliers and distributors (such as Dreyers) have high bargaining power, which allows them to raise their prices when they like. "h They have concentrated more on donating their money to charities therefore neglecting forthcoming changes in trends. "h Declining market share. "h Slow development of new products. Opportunities "h Ben ; Jerry should seek to globalize their product to compete effectively. "h Change their current suppliers and distributors, which might enable them to be more cost effective Threats "h Threat of substitutes "h Economical changes such as in inflation or consumer spending "h Social changes within the consumer market such as health conscience attitudes. This report concludes that Ben ; Jerry has the potential to prosper so long as they: "h To

be prepared for forthcoming changes in consumer needs and wants "h To compromise between maintaining their company image and satisfying their investors needs. "h Try to reduce their supplier and distribution costs by considering other options.

Recommendations This report has identified three main areas of concern that need to be addressed; "h Overcoming Inertia "h Introducing an international joint venture "h Maximizing profits through cost efficiency (Economies of Scale) In todays global environment, change rather than stability is necessary. Rapid changes in technology, competition and customers demands have increased the rate at which companies such as Ben ; Jerry's needed to alter their strategies and structures to survive in the market place. As discussed earlier, one of the reasons why B&J have lost market share is because they failed to change themselves and adapt to a new competitive environment because of organisational inertia. To overcome this Ben & Jerry need to identify the main barrier to change such as consumer tastes. This can be overcome through the development of a marketing plan, as there seems to be no real evidence that Ben & Jerry have done this. Ben & Jerry's reliance on cause generated marketing has its benefit but it also has its pitfalls. Cause generated marketing and/or strategy has adaptability, whereas the long-term marketing plan has focus.

Therefore a good marketing plan is adaptable. Employee productivity is one of the key determinants of a company's efficiency and cost structure so this needs to be improved upon in order to make the company more competitive. The culture of the organization is strongly influenced by the founders and changes will be hard to achieve. It is not recommended

that the culture of the company be changed but that devising new ways to increase employee productivity through the Human Resource Function enhances it. After looking at many different options it is suggested that the employees be put into self-managing teams. Each team will be responsible for an entire task and time deadlines should be given

It is also suggested that pay rewards should be given to the teams that complete their task to the highest standard. This option could lead to a more flexible workforce, as employees will get to know each other's roles. It can also create a flatter organizational hierarchy, which would make the decision making process a lot quicker even though all employees are still involved. Marketing should make the consumer believe that at a given time, be it on a date or after a meal, that B;J is the perfect conclusion to a perfect lunch or a perfect evening. B;J needs to be aware of group decisions especially couples. The idea of marketing B;J as the perfect accompaniment to a date could be profitable. How about the most romantic couple in USA competition?

Ben and Jerry's Swat Analysis Introduction: Ben & Jerry's was founded in 1978 in a renovated gas station in Burlington, Vermont, by childhood friends Ben Cohen and Jerry Greenfield, with a $12,000.00 investment with only $4,000.00 of which was borrowed. They became popular for their innovative flavors, made from fresh Vermont milk and cream. The company currently 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 venues. Ben & Jerry's Homemade, Inc. are dedicated to the creation and demonstration of new corporate concept of liked prosperity. Their mission statement consists of three interrelated parts: product, economic and social. Underlying the mission is the determination to seek new and creative ways of addressing all three parts, while holding a deep respect for individual inside and outside the company, and for the communities of which they are a part.

Product: 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. Economic: To operate the company on a sound financial basis of profitable growth, increasing value for the shareholders, and creating career opportunities and financial rewards for the employees. Social: 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. Ben and Jerry's is on the way to bringing euphoric ice cream to new areas around the world. The first licensed scoop shop was in Israel and now the latest are in Europe.

They crossed their first borders into Canada and Israel in 1988. The Canadian market was slowly growing, but the licensee agreement in Israel has grown from the original factory and scoop shop to 14 scoop shops and nationwide pint distribution. Ben and Jerry's set up an international department and started to explore the world's promising markets. The workteam at Ben and Jerry's have overtime developed varied types of general "teamwork" concepts and

team specific structures unique to specific department needs. At any one time there can be a variety of interdepartmental teams working on specific long-term or short-term projects. In general, there is no company wide policy, standard or definition for what a work team should look like or how it should function. The public is being made more and more aware of the need for a lower fat diet. One would think that this would be a negative for the ice cream industry.

Ben & Jerry's, along with all of their competitors, has recently been forced to develop new lines of ice cream. Ben & Jerry's is taking these new lines, like Low-Fat Ice Cream, No-Fat Ice Cream, Low-Fat Frozen Yogurt, and No-Fat Frozen Yogurt, as a challenge. They are trying to come up with the most original flavors, while trying to maintain the quality, richness, and taste that have made them successful. Ben & Jerry's also takes great care to use milk and cream that come from cows not treated with rBGH, an artificial growth hormone. Ben & Jerry's is gradually switching over their containers from the traditional cardboard to the ECO-Pint, an environmentally friendly, unbleached paperboard. They are beginning with their #1 selling flavor, World's Best Vanilla. The unbleached packaging material had to meet environmental, commercial, and FDA requirements.

A global search was launched to find a material that would bend properly to the rounded shape, as well as, withstand the transporting process and temperatures. The material decided on for the ECO-Pint is an unbleached, brown (kraft) paperboard with an external clay coating to allow the label to be printed. (Press Release, 1999) Competitive Forces Barriers

to entry Ben & Jerry's is actually providing a barrier to entry thanks to its recent buyout by Unilever. This acquisition, along with the Haagen-Dazs takeover by Nestle, has come close to forming an oligopoly among ice cream distributors and manufacturers. This formation of superpowers will deter any upstart company from entering the industry based on the leverage held by the big two. The intensity of Rivalry Two long-time rivals, Ben & Jerry's and Haagen-Dazs, look to be intensifying their rivalry. Unilever, the world's leading ice cream marketer, has recently acquired Ben & Jerry's. Unilever's brand line previously consisted of Breyer's, Good Humor, Popsicle, and Klondike. Unilever was pushed into purchasing Ben & Jerry's based on Nestle, the number two ice cream marketer in the world, and Haagen-Dazs' recent joint venture, Ice Cream Partners.

Unilever's purchase of Ben & Jerry's led their partnership to turn into Nestle's acquisition of Haagen-Dazs. (Reporter, 2001) Threat of Substitutes Crain's Chicago Business reports that the McDonald's Corporation is planning to test new restaurant concepts, one of which is an ice cream shop. This could put quite a strain on Ben & Jerry's. Indirect competition from one of the world's largest and most recognizable restaurants would be a major struggle. (Reporter, 2001) Bargaining Power of Buyers Ben & Jerry's has recently redesigned their distribution. The redesign will create more company control over sales and more efficiency in distribution of its products.

Through the new procedures, Ben & Jerry's "increases sales calls by its own sales force to all grocery stores...and establishes a network where no distributor of Ben; Jerry's products will have a majority percentage of the company's distribution."(Press Release, 1998) Bargaining

Power of Suppliers Suppliers will have a reduced bargaining power, thanks to Ben & Jerry's acquisition by Unilever. If suppliers are unwilling to sell at a price Ben & Jerry's is willing to pay, Ben & Jerry's now has greater resources to reach a greater number of possible suppliers than ever before. Suppliers Ben and Jerry's launched the Supplier Diversity Program, which focuses on identifying minority- and women-owned suppliers. Although this project is still in its fledgling stages, some significant advancements have been made. Additionally, we have improved their efforts to recruit minority consultants. Ben and Jerry's is constantly working to purchase ingredients from environmentally and socially responsible sources: rBGH-FREE- Ben and Jerry's has opposed rBGH since the FDA approved it in 1994.

The company believes this artificial bovine growth hormone is detrimental to the health of cows, threatens family farms by increasing the milk supply, and has unknown long-term human health effects. St. Albans Cooperative Creamery does not use rBGH in the dairy. Vanilla- In conjunction with their vanilla supplier the Virginia Dare company, they use a blended vanilla extract that contains vanilla beans from the Savegre River region of Costa Rica. Our supplier purchases about 10,000 pounds of vanilla beans annually- all that this organization is capable of producing in a year. One result of this relationship is that over 3,000 acres of Costa Rican rainforest have been reforested or reclaimed for sustainable production. Organics- Ben and Jerry's use organic cotton for its line of T-shirts sold in company stores and franchised scoop shops. They entered into a business arrangement with Pataginia for organic T-shirts and other apparel. Since it is not a food

crop, cotton production is not regulated by the FDA and is bottle pesticide and fertilizer intensive.

In 1997, Ben and Jerry's examined the feasibility of a totally organic line of ice cream products. After serious and multi-functional considerations on the issue, the company concluded that cost and consumer expectations were barriers to pursuing an organic line at that time. Distribution Ben and Jerry's has redesigned its distribution network, creation more company control over sales and more efficiency in distribution of its products. Under new arrangement, Ben and Jerry's increased it direct sales calls by its own sales force to all grocery and chain convenience stores and established a network where no distributor of Ben and Jerry's products will have a majority percentage of the company's distribution. The distribution arrangement puts Ben and Jerry's in a better position to control their product sales and implement more efficient domestic distribution. Basically, Ben and Jerry sells it and the distributors deliver it. Prior to this arrangement, Dreyer's Grand Ice Cream distributes significantly more than a majority of sales of Ben and Jerry's products and participated in a large percentage of the retail sales calls. Under the new arrangement, Ben and Jerry's will be responsible for a greater percentage of direct retail selling efforts with distribution being handled by a larger number of distributors.

Under the distribution network redesign, Haagen-Dazs will distribute Ben and Jerry's products to specified territories; the balance of domestic deliveries will be handled by other independent distributors; a number of whom already have distribution agreements with Ben and Jerry's for specified territories. In other territories Ben and Jerry's intends, during the termination notice period under the previous

Dryer's agreement, to conclude distribution arrangements with additional independent distributors. Ben and Jerry's produces super premium ice cream, ice cream novelties, low-fat ice cream, low-fat and non-fat frozen yogurt, and sorbet using Vermont dairy products, Vermont spring water, and high quality natural ingredients. Ben and Jerry's products are distributed nationwide and in selected foreign countries in supermarkets, grocery stores, convenience stores, restaurants and other venues. Competition Ben and Jerry's competition are Haagen-Dazs, Dreyer's Breyer's, Blue Bell, Healthy Choice, and Wells Bluebunny. Although Ben and Jerry's fiercest competition are Dreyer's and Haagen-Dazs. Grocery stores hold a big segment of sales with Ben and Jerry's. In Dreyer's first seven weeks in stores, it garnered $125,656 in sales, compared to Ben and Jerry's $311,289, and Haagen-Dazs' $286,481.

Those numbers reflect sales ate 368 supermarkets in Houston, including Randalls, Albertson's, Kroger, HEB Pantry foods, Rice Epicurean, Fiesta Markets and various independent. At the time of these findings, Dreyer's had 58 percent distribution, compared to Ben and Jerry's 86 percent distribution and Haagen-Dazs' 84 percent. Ben and Jerry's which has about 34 flavors, including it famous Chunky Monkey and Cherry Garcia has, for the most part, out- chunked the competition. Ben and Jerry's also saw an 85 percent increase in its UK sales in 1998, putting it on equal footing with it rival Haagen-Dazs. Their plans are to match Haagen-Dazs in terms of national distribution in the UK, and will spend about 800,000 Pounds on a marketing campaign in support of the national introduction of its product. Ben and Jerry's has been playing catch-up since it entered the UK market in 1994, a good four years after Haagen-Dazs. The latter's entry

into the United Kingdom was a turning point for the ice cream industry on the continent and in the UK. I created a demand among consumers for higher quality products and a rush by local marketers to upgrade their offerings to meet the demand and keep their customers from turning to the new products foe the American invader.

Ben and Jerry's benefits from the consumer awareness of super premium quality generated by Haagen-Dazs, but it has also faced a competitive situation that is more intense because, European ice cream marketers have improve their product offerings in response to Ben and Jerry's and Haagen-Dazs' entry. Customers Almost everybody eats ice cream. Ben and Jerry's specializes in super-premium ice cream. The quality of super premium comes at a price. The ice cream industry likes to fulfill customers' desire for indulgence-and their ability to spend freely. In common terms, people are indulging in ice cream. Consumers are willing to pay more, although higher-end private label offerings also are on the rise and are somewhat mitigating the higher cost of super premium. Also consumers aren't really concerned a the fatting aspect of ice cream. Consumers want ice cream that tastes good. They realize full-fat ice cream tastes better than health-claimed ice cream. Consumers follow many healthy diets, but when it comes to ice cream, they like to reward themselves with the best, and full-fat ice cream is certainly the best. There has been a return in indulgence. Restaurants have doubled dessert menus, and people are looking for rich and flavorful treats to reward themselves for working out in the gym and working long hard hours.

Bibliography

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year ahead." Ice Cream Reporter. January 20, 2001. Vol. 14, No. 2;

  • Pg. 1. http://web.lexis- nexis.com/universe/printdoc "Ben ; Jerry's Announces Distribution Redesign." Press Release. August 31, 1998. http://lib.benjerry.com/pressrel/dist-redesign98.html "Ben & Jerry's
  • Announces Environmentally-Friendly Packaging Innovation." Press
    Release. February 22, 1999.
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