Ben & Jerry's Homemade ice cream Inc.

Tutor’s Introduction
This case study comes from the second edition of Business Strategy: an introduction published in 2001. It is very readable and interesting, providing students with insights into how two entrepreneurs who set up an ice cream shop in a renovated petrol station became the names behind one of the most well-known ice cream brands around the globe. Students will find out how Ben and Jerry tackled the almighty (at the time) Pillsbury and Häagen-Dazs, how they developed a brand to distinguish them from competitors which included a focus on people and giving back to society, and how they successfully used PR to come up trumps in the ‘ice cream war’.

At the end of the case study you will find a series of questions for students to get them thinking critically about Ben & Jerry’s strategy from its humble beginnings to where it is now. The case also provides the opportunity for students to conduct research into the current state of play. They could find out how Ben & Jerry’s have further developed their brand and product offerings (they now have ice cream counters in cinemas, they offer a full selection of Fair Trade ice creams, etc.) and what competition they now face, if any.

Students will find it helpful to read chapter 20 on social responsibililty and business ethics. They could also use this longer case study as a springboard for their work on the Strategic Planning Software (SPS), to which they have free access with purchase of the textbook.

The beginning
Ben Cohen and Jerry Greenfield became friends at school in the late 1960s in Burlington, Vermont in the North Eastern United States. Their reputation as the two 'odd' eccentrics at school led them to form a strong friendship that would last for many decades.

When they left school, both Ben and Jerry became 'hippies' - social drop-outs who lived an alternative and unconventional lifestyle. They both grew their hair and a beard and together with their dog, Malcolm, they moved in together as flatmates. One of the interests they shared was in food and as they discussed various ways of making a living, they concluded that the two most exciting areas of fast food at the time were bagels and ice cream.

Having established that the equipment needed to bake bagels would cost $40,000, the two men enrolled on an ice cream making correspondence course for the cost of $5 each.

In 1978, having developed some basic ice cream recipes, Ben and Jerry set up a shop in a renovated petrol station in Burlington with a capital investment of $12,000 ($4,000 of which was borrowed). From the outset, Ben and Jerry wanted to produce a premium product and the fact that it was made from 'fresh Vermont milk and cream' was stressed. The outlet was called 'Ben & Jerry's Homemade ice cream' and to give the shop a unique and welcoming character, they employed a piano player to play blues in the background.

Initially, the shop was a success amongst Burlington locals, many of whom had known the men when they were growing up. The staff that Ben and Jerry employed were encouraged to take the same 'hippiesh' view of business activity as the owners ('every day was a party'), but the major competitive advantage arose from the uniqueness of the product. Whereas the majority of ice cream products were traditionally-flavoured, Ben and Jerry introduced unusual flavours with 'chunks' to make the textures more interesting, such as fruit, chocolate, nuts, toffee and similar sweets. 'Chunky' ice cream became the prominent feature of the new organisation's image.

During the summer of 1978, customer numbers grew as the reputation of the shop and the ice cream grew. It was when the winter set in at the end of the year that the troubles began. Over the counter ice cream sales dried up and Ben and Jerry realised they would have to find other outlets for their products if they were to avoid bankruptcy.

They persuaded a number of local grocers in Vermont to stock the product in one pint tubs, but it soon transpired that a broader customer base would be needed. Having approached a number of national supermarket chains, Ben Cohen learned that the size of the business, not to mention his appearance and attitude to business, made the buyers reluctant to take stock from him. He was advised that he ought to seek to sell the ice cream to large independent ice cream distributors in neighbouring states who would then sell the product on to the major retail multiples. It was then that Ben and Jerry encountered a problem.

The Pillsbury confrontation
Ben approached the Dari-Farms corporation with a view to have it distribute Ben & Jerry's ice cream throughout the New England states. Dennis Silva, the company vice-president, agreed to take some Ben & Jerry's stock despite Ben's unconventional approach to business. In order to increase distribution further, Ben also approached Paul's Distributors where its chairman, Chuck Green, also agreed to act as a Ben & Jerry distributor.

The market leader in the super-premium ice cream segment at the time was Häagen Dazs, which was then owned by the large US based Pillsbury Corporation. Pillsbury turned over $4 billion a year and had extensive food interests in addition to Häagen-Dazs including Green Giant (vegetables) and Burger King, the fast food outlet.

Kevin Hurley, president of the Häagen Dazs subsidiary of Pillsbury, was the son-in-law of the company's founder, Reuben Matthus. Matthus had started Häagen-Dazs in 1959 in New York. He came up with the Danish-sounding name in the belief that it conjured up a feeling in the consumer of an exotic European brand. By 1984 when the confrontation with Ben & Jerry's took place, Häagen-Dazs held a 70% share of the super-premium ice cream market.

When Hurley discovered that both Dari-Farms and Paul's were distributing Ben & Jerry's as well as Häagen-Dazs, he rang both Dennis Silva and Chuck Green. Although Ben & Jerry's still had only a tiny share of the market compared to Häagen-Dazs, Hurley was determined that the distributors he used were not going to help a competitor.

"We didn't say to the distributor 'You can't carry Ben & Jerry's. We asked them to make a choice'" said Hurley. "We just told them [Silva and Green] that they couldn't sell Ben & Jerry's and Häagen-Dazs." This 'it's us or them' ultimatum took the two distributors by surprise and it presented a distressing dilemma.

"We were just stunned at this comment coming from Häagen-Dazs, this huge company where we were selling trailer loads of ice cream, versus this minuscule amount of Ben & Jerry's we were selling" said Chuck Green of Paul's Distribution. "They had drawn this line in the sand saying that we had to make a decision."

When Ben and Jerry heard of Hurley's threat, they arranged a meeting with the distributors to discuss the situation. In view of the potential of Ben & Jerry's, neither distributor wanted to stop taking their products, but at the same time, the thought of having Häagen-Dazs withdraw their supply could prove very damaging indeed. The three parties agreed that they would need legal representation if they were to take on the might of Pillsbury and they chose Howie Fuguet, a business lawyer who had spent his professional life defending large organisations.

Like Ben and Jerry, Howie was an eccentric. He was said to have cared little for his appearance and had holes in his shoes. He agreed that Pillsbury had behaved in a curious way and sent off a letter to them setting out the nature of Ben & Jerry's grievance. Protesting that Hurley had acted unfairly, Howie wrote to the Board of Pillsbury.

"It would be wishful thinking on the part of your subsidiary's officers [Häagen-Dazs] to imagine that it can bully Ben & Jerry's, stifle its growth and cause it to roll over" wrote Howie. "Ben & Jerry's represents a classic entrepreneurial success story and its owners are aggressive. Häagen-Dazs will have to learn to compete on their merits in the market place. That is the American way and that is what competition is all about."

Notwithstanding the apparent 'correctness' of Ben & Jerry's case, the legal odds were clearly stacked against them. If they couldn't beat the 'bullying' Häagen-Dazs through normal legal channels, then another weapon would be needed.

The 'dough boy' campaign
The key move was to make Pillsbury the target of the campaign and not Häagen-Dazs; Pillsbury was bigger and had more to lose. Since the mid 1960s, the symbol of Pillsbury was the Pillsbury 'dough boy'. The dough boy was used by Pillsbury in its advertising and other corporate communications and was a valuable symbol of the company's identity. So as to avoid the appearance of an ‘ice cream war’ between two competitors, Howie proposed that they attacked the Pillsbury company by specifically targeting the dough boy.

Accordingly, the What's the dough boy afraid of? campaign was launched, intentionally designed to appear as a 'David versus Goliath' conflict where a small company (Ben & Jerry's) had been unfairly treated by a large 'bully' in the shape of Pillsbury.

"We didn't really know a thing about PR. We were just trying to survive" said Ben Cohen. "If we were going to go down, we wanted to let as many people as we could know what was going on. [We wanted to say that] the reason why you can't find Ben and Jerry's on the shelf is because this big corporation [Pillsbury] is trying to prevent you, the consumer, from having a choice about what kind of ice cream you want to buy."

The campaign included T-shirts, bumper stickers, bill posters and other media which all bore the statement "What's the dough boy afraid of?". Jerry launched a one-man campaign outside the Pillsbury headquarters in Minneapolis, Minnesota and it wasn't long before the local television news programmes started carrying the story on a regular basis. This made the public sympathise with Ben & Jerry's, but also provided a lot of free publicity for the company and its products.

From its 17-strong legal department, Pillsbury assigned Richard Wegener to 'get rid of' the 'Ben & Jerry problem'. Wegener quickly realised the size of the task facing Pillsbury. "The publicity became bigger than the dispute itself" said Wegener. The reputation of Pillsbury was at stake and Wegener sought to bring a rapid end to the controversy. Realising that the campaign had grabbed the public's attention and the sympathies were predominantly with Ben & Jerry's, Wegener advised Hurley to back down.

Kevin Hurley was persuaded to sign an out-of-court settlement agreeing not to coerce any distributors. The campaign was over and Ben & Jerry's had won. The controversy not only ensured the defeat of Pillsbury, it also acted unwittingly as an enormous amount of publicity for the Ben & Jerry's brand.

After the victory
The success of Ben & Jerry's after the Pillsbury confrontation was marked. The distribution channels were widened still further until Ben & Jerry's ice cream was supplied through supermarkets, grocery stores, convenience stores, and food service operations, as well as through licensed ‘scoop shops’ (shops selling just their ice cream), franchised scoop shops, and company-owned scoop shops. By 1992, the company's turnover exceeded $130 million and it was on the verge of international development into the United Kingdom.

In the super-premium ice cream sector, a number of new and distinctive product flavours were launched including 'Milk chocolate ice cream and white fudge cows swirled with white chocolate ice cream and dark fudge cows,' 'Chocolate comfort low fat ice cream,' 'Mocha latte' and 'Triple caramel chunk ice cream.'

In addition, non-ice cream frozen desserts were introduced including a range of ice cream 'novelties', frozen yoghurts and sorbets such as 'Chunky Monkey frozen yoghurt - banana frozen yoghurt with fudge flakes and walnuts.' The Ben & Jerry's name and the company's reputation for quality meant that the new products became quickly adopted by the market.

The personality of the founders helped to frame the company's culture and its mission. Two important statements were released which described the company's approach to its business. In 1988, the company stated that "We are dedicated to the creation and demonstration of a new corporate concept of linked prosperity." This was articulated via its Philanthropy Statement and its Mission Statement.

Ben & Jerry's Philanthropy
Ben & Jerry's gives away 7.5 percent of its pre-tax earnings in three ways: the Ben & Jerry's Foundation; employee Community action Teams at five Vermont sites; and through corporate grants made by the Director of Social Mission Development. We support projects which are models for social change - projects which exhibit creative problem solving and hopefulness. The Foundation is managed by a nine member employee board and considers proposals relating to children and families, disadvantaged groups, and the environment.

Mission Statement - Ben & Jerry's
Ben & Jerry's is dedicated to the creation & demonstration of a new corporate concept of linked prosperity. Our mission consists of three interrelated parts: 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. To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees. 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.

Underlying the mission of Ben & Jerry's is the determination to seek new and creative ways of addressing all three parts, while holding a deep respect for the individuals, inside & outside the company, and for the communities of which they are a part.

Questions for students:

1. Identify the stakeholders that Ben & Jerry’s and Häagen-Dazs had in common at the time of the controversy.

2. Which of Donaldson and Preston’s view of stakeholders did Häagen-Dazs have at the time of the confrontation? Provide evidence from the case in your answer.

3. Which of Donaldson and Preston’s view of stakeholders did Ben & Jerry’s have in the case? Provide evidence from the case in your answer.

4. Comment upon the ethical behaviour of the two ‘sides’ of the Pillsbury dough boy campaign. Which side, if either, was right?