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ISEN

& JERRY'S HOMEMADE, INC.

$trategic Ailiances for profit and Social

Good
Ben & Jerry,s Homemade, Inc. manufactures

ilTff_T,cream
is runnin g
ca:n be

super_

market with its peace pops (an alternative

to Dove Barl
andJell-O pudding pops). After six

products. Approaching business in

" "",0,.'Xli:H::,:

democratic, compassionate,

months, sales were b{}

percent short of projections, mainly
because the produ<;t

J::3;,Jffi.":ll J

flopped in supermarkets, Apparently

consumers were
not willing to pay for a superpremium
product in supermarket channels. However, when the product
wa.s
shifted to convenience store channels,

politiJly prlncipled,

and profitable aII at the same tlme,

HeaAquartered in
Waterbury, Vermont, Ben &Jerry,s
mission ir'to giue .o.r_
a good, high qualiry ice cream
product,
while

:utnels

des_

ignating a portion of the profits to

sr.rpport social and

environmental issues.

On the up side, Ben &Jerry,s has been

able to capi"
talize on its customers'loyalV,based
on its reputation

a concerned corporare citizen.

Company Background

fff..: #J:#,'.:
is not just an

inte.esting beginning to a rucrative

business or a marketing gimmick-Ben &Jerry,s ,\ryalks
the talk.,, In 1985, the
company established the Ben &
Jerry,s Foundation,
which donates 7.5 percent of .omplny
pretax profirs to
an ever-changing list of charities.
ey f Ob6, tnis 7.S per_

cent has amounted to $513,1g9 per

year. Robert

Holla'nd,Jr" the newly hired cri,o, has

continued this vision of "caring capitalism,'with Ben
andJerry,s.
Ben & Jerry's success has not been
without its ups
aud downs. One ol'the clowns occurred
in l9g5 when
Ben & Jerry's entered the lucrative
novelty ice cream
594

19g4, for instance, thr:

company marshaled grass roots support

to counteracl

By I e8b, sares had

ilil
to almost g1b5 million by 199b.
Ben &Jerry's interest in social causes

a.,r

In

P_illsbury's efforts to prevent distributors

that carried its

Ben &Jerry,s was founded in 1977

by nvo friends, Ben
Cohen andJerry Greenfield. The
company features su_
per premium ice cream, fro zenyogurt,and
sorbet created
from natural ingredients. The first Ben
& Jerry,s retail
store opened in a renovated gas
station irr Burlington,
Verrnont, but the first f

.."J::"JJT

sales increased by

60 percent.

Hiiagen-Dazs ice cream from selling

Ben & Jerry,s iccr
cream products. Ben &Jerry,s efforts
included a bumper
sticker campaign, an g00 number, and
a media kit con.
taining a complaint letter to pillsbury and
a letter to the
stare attorney general, Ben &
Jerry,s low_budget, high_
social-consciousness canrpaign resulted
in considerable
media hype, painting pillsbury as the ,,bad
guy,,and Ben
& Jerry's as the underdog that representei
.u..1orrurr,,
interest. This positive media attention
se t the stage for future innovative marketing approaches.

Products
In

addition to pint ice cream, Ben and

Jerry,s has expanded its product line to include
tor.., iog,r.t, sorbets,
and novelty items such as peace pops
and Brownie Bars.
The company also has a line of Conscious
Concoctions,

specialty ice cream products lyho.ce

lrilrufactutc pro_

motes quality of life and social responsibility

in a specific
community.

r/+
Distribution Strategy 595
For instance, one flavor ofConscious Concoctions is
Chocolate Fuclge Brownie ice,cream and frozen yogurt,

produced in the Greyston community in yonkers, New

York. At this plant, previously unemployed and under-

skilled people produce more than 2,000 pounds of

brownies per day. The Greyston Community Nenr,rork
uses the profit for such programs as housing and job
training.
Rainforest Crunch ice cream and peace pops use
cashews and nuts from Brazilian rainforests. As an alternative to destroying these resources, profits from the ice
cream are reinvested in the people who harvest the nuts.

The money is used to develop factories cooperatively

owned and operated by the rainforest people.
Maine's Passamaquoddy Indian tribe sells its blueberry crop to Ben andJerry's to make Wild Maine Blueberry ice cream. There is a message about First Group,
the nonprofit organization that supports Native American life, on every container of this product. The profits

support the Indians' economic development and way

of life.

Another flavor of Conscious Concoctions is Fresh

Georgia Peach Light. Ben and Jerry,s buys all the
peaches from a family farm in Georgia as a way to support the endangered livelihood of the family farmer.

Marketing Strateg!

free vaudeville shows and giving out samples. In keeping

with the company's social consciousness, the ,,circusmobile" bus uses solar energy to supply the power needed
for the shows. Another promotional strategy is to provide
free ice cream to any legitimate charitable group that
asks for it.
Since 1995, Ben andJerry's has also expanded opto
the Internet to provide company information from flavor
lists to '\ryhens" and '\vheres" of the social awareness
events. The company has also creatively used the packaging of some of its products, such as the Peace pops, to invite customers to learn about these social causes on its
Website.

Distribution Strategy
Ben &Jerry's markets its pint ice cream, frozen yogurt,
sorbet, and novelty items at the retail Ievel primarily

through supermarkets, grocery stores, convenience

stores, and similar outlets. The company also markets ice

cream and frozen yogurt in 2Yygallon bulk containers

through franchised and company-owned ice cream shops
and through restaurants. MaiI order channels are also
used. And licensing arrangements have been developed
for international sales. Exhibit 1 provides a diagram of
Ben &Jerry's distribution channel srructure.

Supermarket Distribution
Ben & Jerry's has a reputation for producing gourmer
quality natural ice cream, and for creating innovative
Iighthearted promotions. Most of Ben &Jerry,s marketing revolves around sponsoring peace, music, and art festivals all over the country. During these events, the company draws attention to many social causes as it promotes
its products. Ben &Jerry's uses a mere 6 percent of its
earnings to advertise, and most of this is used to fund
music festivals. The primary goal is to use advertising dollars to return something to the consumer and promote
consumer activism.

With a low marketing budget, Ben & Jerry,s relies

heavily on free publicity to generate product awareness.
Says one industry analyst, "Ben &Jerry's does not spend
much on advertising, but they are very good at marketing." By supporting avarieqt ofsocial causes, it is able to
stay in the news often enough to make it pay off.
The company also relies on sample promotions. At
all company-sponsored events, it distributes ice cream,
sometimes free of charge. Ben & Jerry's also promotes
its products through the renowned "circusmobile .,'This
unique vehicle travels from city

to city performing

Ben & Jerry's concentrates heavily on national distribution through supermarkets. Supermarkets are a growing
business, accounting for much of the company's sales
growth, from $97 million in 1991 to gl55 million in 1995.
Most of these supermarkets are reached through wholesalers selected by Ben &Jerry's.

The company's distribution strateg'y is different

from other superpremium ice cream companies. Ben &
Jerry's is much more selective about who sells its products. First, wholesalers must have adequate access to retail outlets

as

well as trucks and facilities to handle the ice

cream at proper temperature ranges. Second, wholesalers must demonstrate that they operate socially conscious businesses. As one executive stated, "We have an
opportunity not only to create alliances with busrnesses
Lha[ shar e our social vision, we also seek to influence and

encourage other businesses to use their resources to

address social concerns that are part of therr own
experience. "

Ben & Jerry's ice cream is distributed in New

England, Pennsylvania, Texas, Florida, the mid-Atlanric,

596

Case

13

T14

Ben &Jerry's Homemade, Inc.

Distribution Channel Structure for Ben & Jerry's

and the West Coast, through independent regional ice

cream distributors. Outside these areas, the ice cream is
distributed through Dreyer's Grand Ice Cream and its
subsidiary, Edy's Grand Ice Cream, Some subdistributors
are also used in these areas, to serve retail channel members. In Vermont and upstate New York, company trucks
are sometimes used to sell directly to retailers.
In 1987, Ben & Jerry's entered into a distribution
agreement with Dreyer's. This agreement stated that outside of the New England, Pennsylvania, Texas, and
Florida areas, Dreyer's would become the master distributor with exclusivity in supermarkets and similar outlets.
Ben & Jerry's main goal when entering into this agree-

ment was to gain access to the supermarket outlets.

Because Dreyer's already distributed its own ice cream
through supermarkets, Ben &Jerry's believed the agreement would make it easier to gain access. The ice cream
that Dreyer's markets is not in the superpremium category, so there is no direcr competition with Bcn &Jerry's,
In 1989, Ben &Jerry's authorized Dreyer's purchase
of Ben &Jerry's of New York, an indcpcndent regional
distributor. This gave Dreyer's exclusivity in the New york
metropolitan marker. Since then, there has been significant growth in that area, and sales to Dreyer's in 1996 account for 55 percent of Ben &Jerry's total sales,
The company believes its relationship with distributors is generally good and has in fact been a key to the
growth of the company.

Franchislng
As of December 1991, ttrere were three company-owned
and 737 North American franchised Ben & Jerry's ice
cream parlors. The franchised "scoop shops" are located

throughout the United States from Vermont to Califoras well as international markets.
Ben &Jerry's particularly supports franchisees with
a special interest or social focus. For example, in lg90 it
nia,

waived the franchise fee for a Baltimore shop owned by

People Encouraging People, a nonprofit organization

that hires and trains people with psychiatric disabilities.
Most of the company's franchise agreements are for
a ten-year term with the option to renew for another ten
years. The franchise is granted an exclusive area, and it
must purchase all its ice cream and other specified items
from the designated local distributor. Each must pay an
initial franchise fee of $25,000 per srore and the franchisee also pays arr advertising fee equal to 4 percent" of
its total gross sales, which Ben &Jerry's uses for regional
and local advertising.
In addition, the company has entered into several
exclusive area franchise agreements by which the franchisee agrees to pay specified franchise fee in install^
ments and to open a specified number of stores in a
particular territory according to a specified schedule.
The franchisee is given exclusive franchise rights in the
territory,

DiscussionQuestions 597

Mail Order
One distribution strategy that Ben &Jerry's uses is quite
different from other superpremium ice cream companies: The company offers customers the option of buying
ice cream by mail. Ben &Jerry's packs its ice cream and
frozen yogurt in dry ice and ships it anywhere in the
United States. Customers are able to pick from six flavors.

International Licensing
In 1987, Ben &Jerry's began to expand internationally.
The company granted an exclusive license to manufacture and sell its ice cream in Canada and Israel. The international licensee can license new franchisees to sell
Ben &Jerry's ice cream and can also sublicense the manufacture of the ice cream. The licensee must pay an initial fee, plus royalties on the franchises. The agreement
is for a ten-year period with the option to renew. Ben &
Jerry's has a different renewal policy for each country,
and the company reserves the right to terminate an
agreement if the licensee does not abide by the terms.
. In 1990, Ben &Jerry's entered into a joint venture
agreement, called Iceverks, in what was then the Soviet
Union, to establish a Ben & Jerry's ice cream parlor in
the state of Karelia. The goal was to provide a model of a
small-scale private enterprise in the Soviet Union while
fostering international cooperation and global understanding, with profits from the joint venture to be used
for cultural student exchanges. Most of the raw materials
were purchased in the Soviet Union, but some dairy ingredients were purchased in Finland. Twenty-five percent of the finished ice cream products are shipped back
to Finland for resale.
However, Ben andJerry's has come across some distribution crbstaclcs in thesc emerging Russian markcts.

Russia still lacks a developed wholesale distribution sys-

tem that will deliver products to stores on time, consistently, and in good condition. Also, disuibution in Russia
is

often controlled by

monopoly with lin\s to organized

crime creating expensive substandard conditions. The

company has also encountered the lack of customer service to which the Western-style customer has become so
accustomed.
Ben andJerry's has made an avid effort to mitigate
these hurdles in Russia by creating its own diverse distribution system. Though expensive, the company believes
this investment will foster a strong and viable distribution
system.

With the creation of an international expansion

team to develop the company's growth overseas, Ben and
Jerry's has encompassed increasing momentum on the
international scene, The markets now include such countries as the U.K., France, and Ireland with aspirations to
expand into Western Europe and Asia.

Discussion Questions
1.

Do you think Ben &Jerry's strategic alliances with

wholesalers, franchisees, and international
licensees are viable in the long run, given that
Ben &Jerry's expects more from its partners than
simply earning profits?

2.

Given the multichannel arrangements used to

distribute Ben &Jerry's products, do you see a

potential for channel conflict developing despite

Ben &Jerry's noble intentions?

3.

Do you think Ben &Jerry's existing channel

structure is an ideal one, given the kinds ofsocial
objcctivcs thc company is pursning? E:rplnin,

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