Ben & Jerry's Case Study

Ben & Jerry's was experiencing a steady growth within their sales figures from 1990 to 1993. However, In March 1994, 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 flavours of the new "Smooth, No Chunks" ice cream line.

Ben & Jerry's 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 increase 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 market place 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 for the up market 25-40's 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 Edy's 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 upmarket 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 I'll 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