IMT Nagpur

PGDM 2009-2011

SERVICES MARKETING

WRITTEN CASE ANALYSIS

SECTION: B2C1

Members:

Ashish Jose Kavi 2009116

Apurva Agarwal 2009119
Mayank Jain 2009128
Nilanjan Chakravarty 2009134
Puneet Grover 2009137
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INTRODUCTION

Ben & Jerry's Homemade, Inc., the Vermont-based manufacturer of super-premium ice cream,
frozen yogurt and sorbet, was founded in 1978 in a renovated gas station in Burlington, Vermont,
by childhood friends Ben Cohen and Jerry Greenfield with a modest $12,000 investment. The
company is now a leading ice cream manufacturing company known worldwide for its
innovative flavours and all-natural ingredients made from fresh Vermont milk and cream.

Manufacturing of all Ben & Jerry’s frozen dessert products occurs in the company’s three plants
located in Vermont. The company 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.
Outside of Vermont, the products are distributed primarily through Dreyer’s and other
independent regional ice cream distributors.

Unilever, a multinational food and personal products company recently acquired Ben & Jerry’s
in spring 2000. The Ben & Jerry's Board of Directors approved Unilever's offer of $43.60 per
share for all of the 8.4 million outstanding shares, valuing the transaction at $326 million. Under
the terms of the agreement, Ben & Jerry's will operate separately from Unilever's current U.S. ice
cream business. There will be an independent Board of Directors, which will focus on providing
leadership for Ben & Jerry's social mission and brand integrity. Both co-founders will continue
to be involved with Ben & Jerry's, and the company will continue to be Vermont-based.

THE FOUNDERS

In 1977 lifelong friends Ben Cohen and Jerry Greenfield completed a $5 correspondence course
on ice cream making from the Pennsylvania State University. Ben Cohen was raised in the town
of Merrick on Long Island by his parents Frances and Irving; Cohen first met and befriended his
future business partner, Jerry Greenfield, in a junior high school gym class in 1963. In his senior
year, Cohen found work as an ice cream man before heading off to attend Colgate University
upstate. Jerry Greenfield was born in Brooklyn, New York, the son of a stockbroker, in 1951. He
lived on Long Island throughout his youth until he left to attend Oberlin College in 1969.

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Greenfield and Cohen began looking for a proper location for their ice cream parlour in 1977.
The criteria that they set down was that the location should be a college town, since they
assumed college students ate a lot of ice cream, and that it should be warm. After comparing
information from almanacs and a guide to American colleges, the pair realized that every warm
college town already had an ice cream shop and settled on Burlington, Vermont, the home of the
University of Vermont, as the location for their shop.

SERVICE CONCEPT (THE IDEA)

Ben & Jerry’s aren’t just about going up to a counter and ordering your preferred flavour. The
entity provides a complete experience that comes along with the product that is delivered over
the counter. To begin with, a large number of “funky and chunky” flavours are in the offing for
the ice cream aficionado. If that’s not enough, customers are provided guided tours of the factory
where the confectionaries are prepared. The Ben & Jerry's Ice Cream Factory is one of the few
tourist attractions in Vermont that stays open after 5 pm.  It has much to offer: a tour, a gift shop
stacked high with everything from tie-dye t-shirts to moose-turd chocolate patties, the "Flavour
Graveyard", even satellite attractions set up in tents along the sidewalk: one offering temporary
tattoos, another extolling the virtues of composting. A giant Chocolate Chip Cookie ice cream
flavor lid on its side, with Ben & Jerry head holes, beckons as a disturbing photo op. The tour
begins with a video in the "Cow Over The Moon Theatre," which tells the story of Ben Cohen &
Jerry Greenfield: how they met in 7th grade gym class, took a $5 dollar correspondence course
about ice-cream making, renovated an old gas station in Burlington for their first store and, most
importantly, sold stock to Vermonters in 1984 to pay for their factory. The tour itself is brief,
giving visitors an elevated view of the factory floor and ending with a "taste test" of samples
from whatever ice cream flavours the plant produced that day. Along the way they are
bombarded with an odd mix of Ben & Jerry's manufacturing statistics and hippie propaganda.

The plant churns out 110 pints a minute, 190,000 pints a day; all of the milk and cream comes
from Vermont family farm cows with no rBGH growth hormones; the Spiral Hardener conveyor
chills every pint for two hours at -40 degrees (-70 with the wind chill); the ice cream is packed in
unbleached paperboard containers to spare the environment from "nasty toxic dioxins;" and each
Ben & Jerry's employee gets three pints of free ice cream a day. The most playfully gruesome

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aspect of the factory is its “Flavour Graveyard”, on a hill in back of the plant, beyond the bulk
milk tanks. The Graveyard exists because of Ben & Jerry's never-ending experimentation with
odd ice cream flavours; some are just too odd for their own good. Each year eight to twelve --
those with the lowest sales -- are "killed" and become candidates for this fatland Boot Hill. The
company has eliminated over 200 flavours, but the Graveyard hosts 27 graves so far, perhaps
enough to get the point across. It is a tranquil place, surrounded by a plastic white picket fence,
and people walk among the fake tombstone placards in quiet reverence.

Over here is interred Peanut Butter & Jelly (1998-1999). Over there lies MizJelena's Sweet
Potato Pie (1992-1993). And way over yonder is Coffee! Coffee! Buzz BuzzBuzz (1996-1999),
a casualty that, in hindsight, should have been ample warning preceding the dot.com meltdown.
The gravestones feature illustrated lids for each fallen flavour, a scoop and cone ascending on
little angel wings. Customers are given a choice to suggest new recipes and also bring back
flavours that have been discontinued.

The company also celebrated Free Cone Day on its very first anniversary which has become a
tradition hence on where free ice cream in cones is given away at all stores internationally.

Ben and Jerry’s also organize a Sundae Festival that includes music, carousels, a helter-skelter,
toe wrestling, egg painting, banana bashing and heaps of free ice cream.

FINANCING THE VENTURE – INITIAL YEARS AND CHALLENGES

The pair set about making their products and factories greener, closed the gap between the
highest- and lowest-paid employees and directed 7.5 per cent of annual pre-tax profits towards
the Ben & Jerry’s Foundation. They sourced ingredients from non-profit organisations.

In order to raise further capital, Ben and Jerry’s came up with the first of its kind in-state
Vermont stock offer. This meant selling stocks of the company to Vermonters. B&J had a very
low minimum purchase of $126, so that people of any economic situation can be a part of this
venture. The offer was sold out and the company was able to raise $750,000. One out of every
hundred family in Vermont had become owners of B&J. By 1999, Ben & Jerry’s was a
successful public company with sales of $237m.

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But this also meant it could be bought. Perry Odak, the chief executive, put the company into
play, against the wishes of Cohen and Greenfield. Dreyer’s, a rival ice-cream company, and
Unilever, the consumer goods group, both made offers.

Cohen, who still owned more than 900,000 shares, made a cash offer with other socially
conscious investors to take the company private. But shareholders, who favoured an all-stock
offer of the same value proposed by Dreyer’s, filed a law suit. In April 2000, Unilever trumped
both offers, bidding $43 a share for the company, a near 25 per cent premium on its share price
that valued Ben & Jerry’s at $326m

GOVERNANCE

Ben & Jerry’s global business is managed out of their Central Support office in South
Burlington, Vermont. Within Unilever, they are grouped with the Breyers®, Klondike®,
Popsicle® and Good Humor® brands in the U.S. Ice Cream division, managed out of
Englewood Cliffs, New Jersey.

Ben & Jerry’s Board of Directors

Their Chief Euphoria Officer Walt Freese receives feedback and counsel on the Company’s
direction from an independent Board of Directors, established at the time of the Unilever
acquisition. The Board is responsible for advising and supporting Ben & Jerry’s senior
management in maintaining and strengthening the Company’s three-part Mission Statement
and protecting Ben & Jerry’s brand equity. This Board, which meets quarterly, includes
several former directors of the Company with longstanding ties to the brand. Once again in
2009, the Board played a significant role in advising Ben & Jerry’s senior management on a
number of important decisions. Notably, the Board provided strong support for the scale-up of
the Values-Led Sourcing program, including a commitment to pursuing Fair Trade
certification across all Ben & Jerry’s products sold globally by 2013.

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SIZING THE MARKET

Vermont is visited by 14.3 million travellers (leisure, business or personal travel) annually.
Domestic travellers outside Vermont and International travellers (Canada) account for 57.8% and
19.3% of the total footfall in Vermont. A Day visitor on an average spends around $155.
Considering the ticket price of $3 for a tour of Ben & Jerry’s Factory, these visitors and local
population of Vermont become potential customers of Ben & Jerry’s Factory Tour. The key
drive/fly markets of New York City, Albany, Boston, Springfield and Québec, and important
secondary markets including Philadelphia and Washington, D.C., are places where Ben & Jerry’s
ice cream is extremely popular and respected. These places would also, therefore, serve as
potential markets for The Factory. A batch of 40 people per half an hour tour of the factory is
easily sufficed by the existing market. Infact, the existing capacity is constrained to handle the
requests for factory tours.

COMPETITIVE LANDSCAPE

Although most manufacturers prefer to keep facilities closed to the public, there are a number of
friendly places that do accommodate visitors. In the U.S. region, these include Theo Chocolate
(Seattle), Jelly Belly Factory (Fairfield, CA), Blue Bell Creameries (Breham, TX), Herr’s Snacks
(Nottingham, PA), Cabot Creamery (Cabot, VT). However, there is no place like Ben & Jerry’s
in and around Vermont. The closest competition it faces is from the other local adventure, leisure
places.

A wider and effective publicity of the Ben & Jerry’s Ice cream and also the city of Vermont are
essential in keeping growth of The Factory alive. Innovative communications strategies
supported by a multifaceted web campaign are delivering the Vermont message to a wider and
more diversified audience. While continuing to promote the Vermont Brand in the key drive/fly
markets of New York City, Albany, Boston, Springfield and Québec, and important secondary
markets including Philadelphia and Washington, D.C., VDTM (Vermont Department of Tourism
and Marketing) is implementing strategies to reach new and expanding demographics such as
younger recreational enthusiasts, ethnic minorities and individuals inclined to take short

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midweek excursions. In effect, Ben & Jerry’s benefits from publicity of Vermont and Vermont
benefits from publicity of Ben & Jerry’s Factory.

BUSINESS PLAN

Ben & Jerry are through its Factory Tour aims to promote the brand amongst the people. It
creates an experience about visiting the Ben & Jerry’s Factory and weaves a story that people
remember and share with others. In the process, it also charges a nominal fee for the same that
people are very willing to pay for what is offered. The whole idea behind introducing this type of
unique service is to offer something more to people, something that customers remember and
talk about. Not only is this service talked about in places around Vermont, but it has also
attracted attention in far off places (like we in India have also taken note of it!), in effect
promoting the brand and generating curiosity about Ben & Jerry’s Ice Cream.

MARKETING THE BRAND

Jerry Greenfield shares in an interview and unconventional ideas on database usage. The typical
story about how a business succeeded in direct marketing relates to how they used their database
to increase sales.

They do have a database. And they use it; but primarily for two reasons:

1. To find out what their customers think about proposed new products;

2. To involve their customers with social causes.

In the interview: -

On Identification

"In the beginning we simply made the highest quality ice cream we could. We like ice cream
with chunks in it--pieces of Oreos, Heath Bars, nuts, candies. The original person we satisfied
was Ben. He likes big chunks in his ice cream. At the same time, he can't taste very well. So I
made the ice cream and he tasted it and I had to keep on adding flavour till he knew what it was.

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"Our goal was simple: I had to please Ben. He was the taste buds of the company. Ben has
always been the creative driving force. He likes to push the boundaries of normalcy.

"We are who we are. We don't hire an advertising or PR firm. Many companies hire an
advertising firm and then try to come up with an image they think will sell their product. We
decided in the beginning to be real and honest about who and what we are. We relate to the
average customer and person on the street because Ben and I are average people on the street. I
think for a lot of companies, customers are just numbers. But they're real people out there. You
have to relate to and interact with them. Put yourself in the mind set of the person on the street
and what's important to them."

On Listening to the Customer

"We respond to customers and their letters. We made several flavours that came from customers
who wrote in with great ideas. Our most recent move was a smooth ice cream to satisfy the
customers who don't like the big chunks.

"Here's another example: We have about 100 franchise 'scoop' shops. Each is independently
owned. They wrote to us saying they were losing business to yogurt shops. Couldn't we come up
with a yogurt? We did. It's been incredibly successful.

"But we can't be everything to everybody. We make a real high quality product at a high cost.
That's why our business is almost entirely through pints. That's the upper-end of the business
“The super premium end”. The premium business is primarily half gallons. Conventional
wisdom says people eat more ice cream when it's in their freezer so when their refrigerator's
empty they don't eat it. We've never subscribed to that theory. Our theory is people are flavour
driven."

The Impact of Computers On Their Company

"It drives our financials and manufacturing. We are building a database of our customers. We use
this database when we want to come out with new product...test new products.

"Or we contact them when we're working on one of our community projects like the Children's
Defence Fund. We have a grass roots network of citizen voters who can be contacted

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when laws or bills come up before Congress involving children's issues. Our goal is to come up
with 100,000 names that will work with the Children's Defence Fund. We have a message on our
pint containers that talk about ‘Call For Kids’ with an 800 number. Our Scoop Shops have a red
phone where you call that number and you hear a recording from Ben and me explaining the
project and asking the customer to leave their name and address if they're interested."

On Making a Profit

"We are not some nameless conglomerate that only looks at how much money we make every
year. We think most people want a relationship with the products they are buying. Ben says most
people buy products in spite of how they feel about the company. But when you find a company
you actually feel good about purchasing from, well, that's rare. I think the opportunity to use our
business and particularly the power of our business, as a force for progressive social change is
exciting. (The Ben & Jerry's Foundation began in 1985. They distribute 7.5 percent of the
company's pretax profits to philanthropic causes. Last year they distributed more than $800,000
to 142 organizations).

On Using Direct Mail

The names came from various sources. "People call in. We have about 100 franchise shops that
send us names all the time for people who want to be on our mailing list."

One of their first uses of direct mail was when they decided to sell stock in their company. They
decided they would only sell to Vermont residents.

Their reasoning: They began in Vermont, Vermont supported them and "business has a
responsibility to give back to the community from which it draws its support." They thought the
company should be owned by the same people who lined up for scoops of ice cream when they
first opened their small shop.

Banks told them selling only to Vermonters wouldn't work. How could they raise enough
money? Said the experts "small stockholders cost too much administratively; Isn't worth it?"

They set up a toll-free number throughout Vermont for investors to call and ask how-does-it-
work?

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Most stock ads are listed in the financial section. They listed theirs with the movie and TV
schedules.

Most stock ads are dull, dreary, boiler-plate. Their headline: "Get a Scoop of the Action."

What they needed to raise: $700,000. If they didn't take in $500,000, they'd refund the money
and try another way.

They sent out 1,500 prospectuses and oversubscribed the offer (more than 100 people received
money back because they committed too late). About 1,800 households bought stock (or about
one in every 100 Vermont families).

One of their most recent ventures: "Ben & Jerry's Gifts By Mail."

They mail a catalogue with gifts including toy Ben & Jerry models of their delivery trucks, a
limited edition ($50) Russian poster in honour of opening their first store in Russia, T-shirts,
puzzles and yes, ice cream by mail. We asked a staff member how this was doing. Her answer:
"All I can tell you is the warehouse is constantly busy..."

SCOOP SHOPS

Ben & Jerry’s began as a single ice cream scoop shop in 1978, and though our business has
expanded wildly since then, our roots are still firmly planted as a scoop shop company. Most
are owned and operated by independent franchisees, although Ben & Jerry’s also operate a
small number of company-owned stores. Some of our scoop shops are what we call a
PartnerShop®, owned and operated by a non-profit organization. By the numbers:

United States, Canada, Bahamas & Caribbean

 354 franchised scoop shops

 6 franchises operated by non-profits (PartnerShop® stores)

 4 company-owned stores (Vermont)

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Europe (16 countries)

 374 franchised scoop shops, plus 24 seasonal carts

 1 company-owned store (UK)

Asia (Hong Kong, Singapore, Israel)

 20 franchised scoop shops

 1 company-owned store (Singapore)

Latin America (Mexico)

 55 franchised scoop shops

Australia

 1 company-owned store

THE BEN & JERRY’S FOUNDATION

The Ben & Jerry’s Foundation is a non-profit, charitable foundation (and a separate entity
from the Company) established in 1985 to offer competitive grants to non-profit, grassroots
organizations throughout the United States that facilitate progressive social change by
addressing the underlying conditions of societal and environmental problems. In addition to
the Foundation’s original endowment, Ben & Jerry’s makes yearly donations based on a
formula related to total sales. In 2009, Ben & Jerry’s Homemade, Inc. contributed $2,001,550
to the Foundation, a 3 percent increase over the previous year.

The Foundation’s funding priorities include organizations that: 1) help ameliorate an unjust or
destructive situation by empowering constituents; 2) facilitate leadership development and
strengthen the self-empowerment efforts of those who have traditionally been disenfranchised in
our society; 3) support community movement-building and collective action.

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EXHIBIT [A]

To the
To the Stakeholders of Ben and Jerry’s Inc.
Ben & Jerry’s Inc.:
We have been engaged to conduct an examination of the Selected Data identified below which is contained
within the Ben & Jerry’s Inc. Social and Environmental Assessment Report for the year ended December 31,
2009. Ben & Jerry’s Inc. management is responsible for the Data and the selection of which Data would be
included in the scope of this examination. Our responsibility is to express an opinion on the Selected Data listed
below based on our examination.

Except as discussed in the following paragraph, our examination was conducted in accordance with
attestation standards developed by the American Institute of Certified Public Accountants and the International
Auditing and Assurance Standards Board’s ISAE 3000. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the Selected Data are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and statements included in the
Selected Data. We believe that our audit provides a reasonable basis for our opinion.

We were unable to obtain sufficient audit evidence to satisfy ourselves that the statements concerning Fair
Trade ingredients in Europe, Values-Led Sourcing (VLS) spend in Europe, impact of Caring Dairy in Europe on
greenhouse gas emissions, and Cage-Free egg certifications and purchases in the U.S., are fairly presented.
These items are marked with an asterisk (*).

Non-financial data is subject to more inherent limitations than financial data, given both the nature and the
methods used for determining, calculating, sampling or estimating such data. We have not carried out any work
on data reported other than the 2009 Selected Data, prior reporting periods, nor in respect of future
projections and targets. We restrict our opinion to the Selected Data.

In our opinion, except for the effects of such adjustments, if any, as might have been determined to be
necessary had we been able to examine evidence regarding Fair Trade ingredients in Europe, VLS spend in
Europe, impact of Caring Dairy in Europe on greenhouse gas emissions, and Cage-Free egg certifications and
purchases in the U.S., the Selected Data for the year ended December 31, 2009 is fairly presented, in all
material respects.
 

          
LeBlanc & Associates, LLC
       Wilton, NH
      August 17, 2010

Source:  www.leblanc-associates.com

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