Ben & Jerry’s Homemade Inc. Presented by: Jared Young August 2002
Session Objectives • To discuss and understand whether to wholesale, or not to wholesale • To show that some products are more efficiently distributed through strong ties with independent wholesalers
Session overview • Background • Major issue • Situation analysis • Identification and evaluation of alternatives • Recommended strategy • Implementation plan • Conclusion
Company background • Vermont based manufacturer of ice cream • Founded 1977 by Ben Cohen & Jerry Greenfield • Annual turnover: $155M • Mission • Give consumers a good, high quality ice cream product, while designating a portion of the profits to support social and environmental issues
Caring capitalism • Societal marketing concept • Quality of life and social responsibility in a specific community • Ben & Jerry foundation • Donates 7.5% pre-tax profits and free ice-cream to charities
Product range Gifts Super premium ice cream (also in low fat) Premium ice cream (super-market range) Conscious Concoctions (specialty ice cream) Frozen yoghurt Novelty items Sorbet • Over 50 innovative flavours (and names) • Mostly pint size and bulk containers • Environmentally friendly packaging
Community involvement • Social programs • Conscious Concoctions • Circusmobile • Use advertising budget to return something to the consumer and promote consumer activism • Sponsorship of peace, music and art festivals • 6% of sales is budgeted for promotion
Influences on channel design • 1985 – novelty ice-cream • Consumers were not prepared to pay for a super premium product in supermarkets • However, sales improved by 60% when shifted to convenience stores • Mail order (choose from 6 flavours) • Internet • Flavours and social awareness events • http://www.benjerry.com
Current channel structure Mail order & internet Wholesalers International Licenses Franchisees Supermarkets & Convenience stores Company stores
Current issues to address • Maintain product quality image • Control over ‘concerned citizen’ image • Clear focus on societal issues • Accountable to stakeholders to make profits • Charities, employees, franchisees etc. • Need to review their channel structure • growing company with multi-channel distribution strategy (^ stakeholders = ^ pressure for profits) • Provide opportunities for future growth
Apparent problem • What is the most effective way to manage the wholesale function for a super-premium ice-cream product in domestic markets while maintaining a socially responsible marketing orientation?
3 types of wholesalers • Merchant • buying, taking title to, storing and handling products in large quantities • Agents and brokers • independent, do not take title, negotiate buying and selling, charge fees • Manufacturer wholesaling offices • owned by manufacturer, store and distribute products
Independent Merchant Wholesalers • Independent regional ice cream distributors • Dreyer’s Grand Ice Cream (exclusive agreement) • Ben & Jerry’s of New York • Edy’s Grand Ice Cream distributors • Some sub-distributors
Advantages and disadvantages of using independent wholesalers • Disadvantages • less control over logistics and image related factors • may have competing interests • potential for conflict • Others? • Advantages • specialists • efficient • existing facilities • market coverage • sales networks • market information • small order processing • Others?
Advantages and disadvantages of Owning the wholesale function • Disadvantages • not wholesale specialist • high investment costs • possible reduction in sales networks and market information • Others? • Advantages • greater control over logistics and image related factors • flexibility • Others?
Company strategic analysis • Internal analysis • External analysis • Competitor and • Market analysis
Relevant strengths • Gourmet quality, natural ice cream • Good corporate citizen • Loyal customers • Positive media attention • Underdog that represents everyman’s interests • Innovative • Good relationship with distributors • Key to growth • Other Strengths?
Intensity Import-ance High Medium High • Good corporate citizen Med • Gourmet quality, natural ice cream • Positive media attention • Relationships with distributors • Innovative • Customer loyalty Strengths Matrix
Relevant weaknesses • Perishable product • Difficult and expensive to store/transport • Requires specialist equipment • Use of multi-channel strategy for a niche product • Increasing number of stakeholders creating potential for channel conflict • conflict between profits and social responsibility • Difficult to control channel members especially in socially responsible marketing philosophy • Any other weaknesses?
Intensity Import-ance High Medium High • Channel control Med • Potential for channel conflict • Perishable product • Specialist requirements • Need to satisfy stakeholders Weakness Matrix
Relevant Opportunities • Changing socio-cultural lifestyles • destination shopping, entertainment, experiences and novelties. • Changing attitudes towards healthy eating (eg low fat, natural ingredients and lactose free) • Further exploitation of good corporate image • Market development eg use franchising to target tourists and special occasions etc • Expand product lines and/or retail concepts eg gift shops • Increasing use of technology • Any other Opportunities?
Probability of success Potential Attract-iveness High Medium High • Gain control over channel Med • Use technology for market penetration • Exploit good corporate image • Changing attitudes, lifestyles and behaviours • Market development Opportunity Matrix
Relevant Threats • Rely heavily on free publicity (risk of negative publicity) • Growth could bring conflict • Depleting supplies of quality ingredients for conscious concoctions • Negative attitudes to fat/milk products • Increasing reliance on high cost technology • Competitors • Any other threats?
Probability of occurrence Potential severity High Medium High • Risk of negative PR • Depletion of quality ingredients Med • Increasing reliance on high cost technology • Competition • Channel conflict from growth • Negative attitudes to fat/milk products Threats Matrix
Competitor analysis • Direct competitors • other firms selling premium ice cream • Haagen-Dazs (Pillsbury) • Indirect competitors • other firms selling ice cream • less direct firms are selling other treats or cold refreshments such as soft drink, beer or ice blocks
Market analysis • Increasing market share through ‘scoop shops’ and supermarkets but who are their target markets? • Purchasing for special occasions or as a treat • Birthday, celebrations etc • Tourists, people on holidays • Café and restaurant patrons (eg picnic point) • Movie patrons or other entertainment
Strategies for growth • Ansoff’s growth option matrix Existing ProductsNew Products Existing MarketsMarket Penetration Product Development New MarketsMarket Development Product Diversification
Should we do the wholesaling or use intermediaries to take advantage of growth opportunities?Did anyone identify a different case issue? What is the major issue?
Identification of alternatives • Retain current arrangements but strengthen alliances • Own the wholesale division (forward integration) • Gain administrative control by establishing a manufacturer-wholesaler franchise • Use dual channel strategy by establishing own wholesaling for more selective outlets • Others?
Evaluation criteria • Minimise channel conflict • Be socially responsible • Cost effectiveness • Control product quality • Sustain competitive advantages • Maximise flexibility for sales growth • Customer loyalty
Should we use any other criteria for evaluating alternatives?Which are the least important?
A scoring model is used to evaluate alternative strategies on each of the criteria
Recommended short-medium term strategy – Alternative A Maintain current channel strategy BUT • Develop strategic alliances with intermediaries • Motivation to engage in socially responsible activities • Shared goals • Shared benefits • Seamless distribution • Basis for channel member selection • Implement stronger control mechanisms • Greater accountability • Performance measurement
Implementation plan • What needs to be done? • Who is responsible? • When should the strategy be implemented? • How will we measure success?
Conclusion • Good relationships with channel members results in greater opportunities for success • A dominant manufacturer desiring significant levels of control (to protect and enhance its public image) can often benefit from forward integration • Manufacturers with products requiring specialist storage and transportation expertise should use independent wholesalers • The use of strategic alliances in the channel provides win-win solutions for all, greater control and accountability and seamless distribution