A quick introduction to the case

1. Ben&Jerry’s homemade Inc.Lionel Perruchoud - HEC Lausanne - Autumn 2010Corporate Social Responsibility – Professor Déborah Philippe To implement CSR in thishandout, the hard copy isprovided to you in a black-and-white version, recto-verso format, without plastic cover and usingCentury Gothic (-30% inkconsumptionthanArial)

2. A quick introduction to the case Who? Ben&Jerry’s, a high-quality and all-natural ice cream firm. • 1978: Founded by Ben Cohen and Jerry Greenfield after taking a 5$ correspondence course on the art of ice cream making. • 1992: Sales over $130 million and production over 10 million gallons. Why? Ben&Jerry’s can be considered as one of the best example of CSR implementation in a firm for the 30 last years. As a whole, Corporate Social Responsibility is totally incorporated in the day-to-day business. What? We are going to analyze the performance of the firm in terms of Marketing, Innovation and Stakeholder management, to describe their leadership style and their competitive advantage and to make a statemetn: are they crazy or smart? Finally, we are going to provide a small SWOT analysis followed by some recommendations. Ben & Jerry's - Case Study - Autumn 2010

3. 1. Evaluation of the performance Marketing • What they do • Little media advertising and no contract with an advertising agency • Community oriented Marketing (Giraffe Project “to encourage people who stuck out their neck”) • Festivals sponsoring “in a throwback to Woodstock” (the festivals must give their profits to charity actions to be sponsored by Ben&Jerry’s) • Evaluation • Ben&Jerry do not use traditional marketing. Their advertising policy allows them to use money in a smarter way, to do and help social activities. By doing little media advertising, they certainly spare a lot of money, knowing that TV promotions are very expensive for example. • But can they really reach their consumers? How would they promote their ice cream in Europe by sponsoring US festivals? Those festivals allow Ben&Jerry’s to only reach few people. Innovation • What they do • Innovation is the co-key concept which characterize Ben&Jerry’s ice cream with all-natural ingredients. A large line of new flavors are created each year, completing the existing products. The firm is good at innovation, due to one R&D and one quality department on each production site, and very skilled employees. This also allows high quality controls. • Evaluation • Ben&Jerry’s is a cutting-edge firm and will probably stay as one of the leaders in innovation. New flavors can compensate the declining old ice cream varieties and draw consumers to buy Ben&Jerry’s ice cream, because they are curious to discover those new flavors Ben & Jerry's - Case Study - Autumn 2010

4. 1. Evaluation of the performance (2) Stakeholder management (each stakeholder is subject to others CSR programs or actions, but those are the most important) • What they do? • Employees • Generous wages; social benefits (life insurance, profit sharing plan, etc.); ability to be member of the Joy Gang (work conditions improvement) or Wiz Kids; eating as much ice cream as they want. • Shareholders • Clear CSR communication; Annual General Meeting as a two-days music festival. • Suppliers • Ben&Jerry’s work with local and social suppliers; they do alliances with those suppliers to be sure they share the same ethical values. • Consumers • Daily plant tours are set up to visit the production sites: nothing is hired; high quality controls (from fruit freshness to cleaning the tanks 2-times a week). • Society • Two audits (financial and social) are conduct every year. Formation of the Ben&Jerry’s Foundation to help small, not-for-profit, grassroots organizations. • Evaluation • Ben&Jerry’s implemented CSR as a point to which it becomes difficult to distinguish CSR from the day-to-day business. All stakeholders are treated with high ethical values and the firm cannot be criticized on its stakeholder management. As mentioned before, the CSR is not fragmented, but implemented as a whole. It would be hard to do better in terms of responsive CSR as far as in terms of strategic CSR. Only one question remains: isn’t it too much? Ben & Jerry's - Case Study - Autumn 2010

5. 2. What is Ben and Jerry leadership style? Ben and Jerry use “Transformational leadership” Why? • Ben and Jerry broaden and elevate interests of employees to generate implication in the firm and some kind of leadership. By doing so, they stimulate intellectually and emotionally their employees and as you know a firm becomes more competitive with involved workers. • All employees are allowed to eat as much ice cream as they want. Therefore, they consider themselves as a real stakeholder of the production line. Hence, it is like if the ice cream was the « little baby » they just produce. By doing so, they are concerned a lot by the quality and the good running of the production site. They transform themselves in some kind of a manager. • Jerry created the Joy Gang to allow « any employee who wanted to help him boost morale ». The Joy Gang’s output are diversified: music for the production floor, massages or a chocolate machine. When an employee can customize his workplace to make job easier to do, he becomes more productive, efficient, and also aware. He would consider himself as integrated in the firm and will struggle for it. • Ben and Jerry maintain a philosophy of « caring capitalism ». They wanted to introduce some fun in the firm, knowing that this philosophy means “serving the community is just as important as generating profit or producing super-premium ice cream”. As you know, an employee will work better with some fun in his work life. To be too serious is boring. • Evaluation • Ben and Jerry installed a sort of a « win-win » philosophy: workers have a better work place and as a result they become more productive. It is for sure one of the keys of the Ben&Jerry’s success. Ben & Jerry's - Case Study - Autumn 2010

6. 3. Ben & Jerry’s competitive advantage • According to Porter’s theory • There are two types of competitive advantage: cost or differentiation. In our case, it is clear that Ben&Jerry’s is not competing on prices but on quality and innovation, therefore on differentiation. • How to have and maintain a competitive advantage? • To maintain its competitive advantage, Ben&Jerry’s must have resources and capabilities that are superior to those of its competitors. This is going to prevent its competitors from replicating. • Ben&Jerry’s resources and capabilities • A clear positioning (all-natural and high-quality products) • A brand which is strongly connected to CSR • Each production site has his R&D department and his quality department • Ben&Jerry’s hire high-skilled employees, or provide them cutting-edge formations • The firm brings constantly new products in the market (“in 1993, about six to eight products were to be introduced”) • Employees are motivated and implied in the production process • As seen before, transformational leadership brings in this case more productivity • Evaluation • Ben&Jerry’s has a big competitive advantage. With its innovation workforce, its strong CSR-related brand, etc., the firm is seen as unique in the ice cream market. It has a strong advantage and differentiation too. Ben & Jerry's - Case Study - Autumn 2010

7. 4. Ben and Jerry: crazy or smart? In fact, Ben and Jerry are crazy and smart. Let’s see why and at which level. On a 1-to-10 scale of smartness (10 = excellent), Ben and Jerry are at 8 Why? • They have a clear CSR philosophy and the shareholders know it. Their CSR policy is not fragmented but seen as a whole. By doing what they say, the CSR has been totally integrated in the core business of Ben&Jerry’s and it is sometimes hard to distinguish it from day-to-day activities (ex: B&J’s work directly with small famers). • They prove that it is possible to make money and to “do the right thing”. With little advertisement, they grow at high rates (+62% from 1988 to 1990). So they disapprove old theories that say : “publicly hold corporations cannot make a profit and help the community at the same time”. • But Ben and Jerry don’t reach the 10 on the scale because there is no element that proves that shareholders will understand all of those CSR programs on the long term. Some of them could consider all those CSR actions are a waste of money. • Finally, there is a big risk in terms of CSR: when you are one of the leaders, the only way you can move is by falling. • Isn’t it much smarter to concentrate all your efforts on one or two major CSR programs or activities, instead of trying to satisfy everyone sometimes with some superficial actions? Ben & Jerry's - Case Study - Autumn 2010

8. 4. Ben and Jerry: crazy or smart? (2) On a 1-to-10 scale of crazyness, Ben and Jerry are at 5 Why? • At first glance, the CSR programs launched by Ben and Jerry seem to be totally crazy and you could ask yourself: « Why are they doing so much? » • If you write down a list of all the activities and programs related to CSR they launched or did, you will probably think they are totally crazy. • But we cannot conclude that Ben and Jerry, by choosing an all-CSR way, are completely crazy, because that is perfectly thought and it works well. Just have a look on the profits and you should change your mind. • The question is: would Ben&Jerry’s has grown so much if they had no or less CSR program? “Studies of the effect of a company’s social reputation on consumer purchasing preferences (…) have been inconclusive at best1”. Shareholders could consider it, as said previously, as a waste of money. Although Ben and Jerry prove the contrary: this is possible to do a lot of money with huge CSR programs. 1  « The link between competitive advantage and corporate social responsibility », Michael Porter, HBR Ben & Jerry's - Case Study - Autumn 2010

9. 5. SWOT Analysis Ben & Jerry's - Case Study - Autumn 2010

10. 6. Recommandations 1  « The link between competitive advantage and corporate social responsibility », Michael Porter, HBR 10 • Too much? • Using a metaphor, Ben&Jerry’s could be considered as a watering can. The water is the CSR in general and the stakeholders are the flowers. Is it really a good way to water all the flower like that? Wouldn’t it be better to concentrate all the CSR efforts on two or three main aspects? Ben&Jerry’s seems to disperse itself and if it creates another action, the latter will have little impact on the image of the firm. Moreover, all those programs are hard to manage and if one of them fails, Ben&Jerry’s will be criticized, whatever they try to be well everywhere compared to others firms which consider CSR as unncessary. • Health • As you know, the society evolves. Would it be correct to sell butterfat ice cream in the next decade? Somehow, Ben&Jerry’s could be compared to McDonald’s (in the 21th century): very good at CSR but selling unhealthy products. Ben&Jerry’s should perhaps be more concentrated on health programs or fat-less ice cream. • Ecology • The Ben&Jerry’s waste policy and its videoconference system allow it to be competitive on the ecological aspect. Maybe should the ice cream firm add a fourth point to its “Company Missions” (Product – Social – Economic). That is, “Ecology”. • Conclusion • By the way, Ben&Jerry’s founders do not see CSR as a cost and prove that it can be an huge source of opportunities, therefore profits. The economic data seems to confirm the credibility of their CSR policy and the growth rates should be maintained. Ben&Jerry’s should be able to look toward with self-confidence. Ben & Jerry's - Case Study - Autumn 2010