Ben and jerry's stock price

This case was prepared by Senior Researcher Gerry Yemen, Professor Yiorgos Allayannis, and Associate Professor Michael J. Schill. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  2011 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.

BEN & JERRY’S HOMEMADE: THE UNILEVER SCOOP

Four offers were on the table to purchase Ben & Jerry’s Homemade (Ben & Jerry’s) in

early 2000; in the end, Unilever’s deal was by far the most attractive. And now, 10 years after becoming a subsidiary of the Dutch global consumer product company, much had changed at Ben & Jerry’s—and much had remained the same.

By the time the purchase was announced in South Burlington, Vermont, on April 12,

2000, Ben & Jerry’s pre-deal stock price of $21 had increased substantially, to just shy of $35, and the company had $237 million in sales and $3.4 million in earnings. Unilever had increased its earlier tender offer of $36 to $43.60 per share or $326 million total, to be paid in cash (see Exhibit 1 for stock price charts).1 Both Unilever and Ben & Jerry’s hoped to benefit from the acquisition.

The Unilever muscle offered Ben & Jerry’s an opportunity to scale up and enter several

new markets internationally—something it had not been able to do previously. Unilever was one of the largest global firms in the world operating in 88 countries, employing 255,000 worldwide, and earning sales over $45 billion in 1999.2 Within the US, the company had 66 offices, manufacturing operations in 23 states, 22,000 people, and over $8 billion in sales. With increased access to capital and resources, Ben & Jerry’s would have the potential to dramatically increase the size and social impact of its brand.

Unilever was looking to satisfy investor pressure to grow. And part of the company’s

growth strategy had included several larger acquisitions before this one. (It acquired 20 companies in 2000.) Ben & Jerry’s gave Unilever an edge in the competitive “super-premium” ice cream segment in several U.S. markets—something else it had not been able to do previously. In addition, Nestlé had entered a joint venture with Häagen-Dazs to leverage each

1 “Unilever Scoops Up Ben & Jerry’s,” BBC News, April 12, 2000, http://news.bbc.co.uk/2/hi

/business/710694.stm (accessed August 4, 2011). 2 U.S. Securities and Exchange Commission (SEC), Unilever Form 20-F, 1999, 12–3 and 41–3.

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-2- UV5663 other’s distribution channels, which would create a clear advantage in the segment. And with the potential to spread the Ben & Jerry’s brand and values to the world, Unilever would now own a company that validated its corporate social responsibility interests.

As Ben & Jerry’s became part of a conglomerate family, one question remained on the

minds of many: whether Ben & Jerry’s would still have Free Cone Day.

Screaming for Ice Cream As most industry watchers had expected, the deal included a couple of unusual twists.

During negotiations, Unilever seemed to soften its initial proposal restricting Ben & Jerry’s social commitments and interests. Ben & Jerry’s would stay in Vermont, continue to purchase non-BGH (bovine growth hormone) dairy goods from Vermont, and donate 7.5% of its profits to charity, and employees would still get their three free pints of ice cream per day. Ben Cohen and Jerry Greenfield would remain active in the firm’s social agenda and continue to manage the brand, and Perry Odak would remain in the top slot running the firm. Unilever also agreed to pay $5 million to start up a Ben & Jerry’s foundation for funding businesses in low-income communities. The ice cream company would operate as an independent subsidiary (not become part of Unilever’s Breyers or Magnum’s brands) and would have its own independent board of directors, and the CEO would report to both Unilever’s and Ben & Jerry’s boards. Ben & Jerry’s management had full discretion over which of Unilever’s HR policies it chose to adopt or modify. According to Carlos Perseguer, Unilever’s director of ice cream operations in Europe, many of these concessions were based on fear within Unilever of “contaminating” Ben & Jerry’s.3

New Flavor at the Top

At first, aside from some public grumbling from Cohen and Greenfield about big corporations, not much changed at Ben & Jerry’s. Then, in early 2001, a longtime Unilever executive, Yves Couette, was selected to take over as the new Ben & Jerry’s CEO (what employees called chief euphoria officer). When Couette heard his company had bought Ben & Jerry’s, he said, “My first reaction was, they are out of their minds.”4 Yet, once appointed to run the business, Couette quickly adopted the casual attire and accepted employee playfulness. When he sent a group of managers off-site for a day for one of Unilever’s standard branding exercises, the managers returned with an ice-cream-cone-shaped drawing that said, “good for the belly and soul.”5 When Couette wanted Ben & Jerry’s anti-big-business employees to learn more about

3 James E. Austin and Herman B. Leonard, “Can the Virtuous Mouse and the Wealthy Elephant Live Happily

Ever After?,” California Management Review, November 1, 2008, 80. 4 Patrick Kiger, “Corporate Crunch,” Workforce Management 84, no. 4 (April 2005), 35. 5 Kiger.

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-3- UV5663 financial issues, he hired a consultant who taught the concepts playfully: Participants had to operate their own lemonade stands.

Ben & Jerry’s business seemed to thrive under the arrangement. Between 2001 and 2004,

sales reached $417.9 million, operating margins tripled, and operations expanded into 13 new countries.6 Not everyone was surprised by the success, given Unilever’s history of buying big- name brands and driving up their bottom lines. Indeed, there had been inefficiencies in Ben & Jerry’s production and distribution, and Unilever used its hefty manufacturing and distribution systems to save money and use less energy.7 To avoid duplication and increase efficiencies, it employed some of its resources from other ice cream production operations, and for that reason, 69 Ben & Jerry’s legacy employees were let go, and two plants were closed. All in all, though, sales and profits surpassed Unilever’s expectations—Ben & Jerry’s had the largest sales growth of any of Unilever’s businesses.8

Flavour with a U In 2004, Couette was replaced by Walt Freese, who had been Ben & Jerry’s chief

marketing officer since 2001, and who described his view of the merger like this:

The company [Ben & Jerry’s] brought its super-premium products to the Unilever business portfolio, but perhaps more importantly, Ben & Jerry’s brought a deep sense of values-led decision making and progressive vision that would complement and push Unilever into new areas of social, environmental, and economic commitment. Unilever clearly understood and publicly stated that it believed much of the success of the Ben & Jerry’s brand was based on its connections to “basic human values.”9 For the next four years, Freese’s team maintained success, and by 2008, Ben & Jerry’s

held 36% of the ice cream market share, second behind Häagen-Dazs’s 44%10—continuing to fulfill merger expectations. And Unilever kept its promise to support the Ben & Jerry’s Foundation, having contributed $10 million to it over the years, as well as having donated an undisclosed (the company used the word significant) amount of product to community groups and nonprofits in Vermont and the United States.11 “I was skeptical about this supposed

6 Kiger, 32 and Ruth Mortimer, “A Big Dollop of Investment,” Brand Strategy, April 2005, 8. 7 Austin and Leonard, 80, 89. 8 Austin and Leonard, 82. 9 Austin and Leonard, 81. 10 “Ben & Jerry’s SWOT,” Marketingteacher.com, http://www.marketingteacher.com/swot/ben-and-jerrys-

swot.html (accessed August 4, 2011). 11 Austin and Leonard, 85.

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-4- UV5663 ‘transport of values’ from Ben & Jerry’s to Unilever, but it has happened to some degree,” Jerry Greenfield said.12

Ben & Jerry’s status as social icon was maintained when it came out against cloning and

made sure the public was aware that the firm would never use any supply chain material from cloned animals.13 And keeping up the hipness, Ben & Jerry’s also launched a Facebook app called Dessert Island so people could vote on flavors they would like to have in Europe. With names and flavors such as The Dublin Mudslide, Minter Wonderland, and The VerMonster, the ice cream was shown stranded on a deserted island while trying to make its way east across the Atlantic Ocean. “We kept B&J separate so as not to damage or dilute it,” Perseguer said. “It has special treatment within Unilever.”14

Despite those efforts, there were some scuffles, including one over Unilever corporate policy disallowing partisan political action, when some Ben & Jerry’s employees were asked not to go to an antiwar demonstration in Washington, D.C., on a bus emblazoned with the Ben & Jerry’s name.

By 2010, Freese had resigned and was replaced by another Unilever legacy executive,

Jostein Solheim, who had spent 14 years in the firm’s ice cream segment (see Exhibit 2 for ice cream segment data). Although Ben Cohen and Jerry Greenfield played less of a role in the firm than many had hoped, the pair still kept track of what was going on. “Sometimes the company does activities that promote various social causes that I agree with, so I participate in those,” Cohen said. “Recently, the company did a campaign about reducing our nuclear arsenal—taking the $10 billion we would save from cutting the arsenal in half and using it for kids and schools. Jerry and I were active in promoting that campaign.”15

Despite much of the squawking over being sold to a large company, 10 years later, a lot

of what was Ben & Jerry’s simply stayed the same. And yes, Ben & Jerry’s continued Free Cone Day each year.

12 Melissa Shin, “Green Targets: What Happens When a Big Company Swallows a Little Green Pill?,”

Corporate Knights, February 1, 2008, 14. 13 Pallavi Gogoi, “The Case Against Cloning,” Bloomberg Businessweek, March 7, 2007,

http://www.businessweek.com/bwdaily/dnflash/content/mar2007/db20070306_592550.htm (accessed July 5, 2011). 14 Austin and Leonard, 87. 15 Austin and Leonard, 98.

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-5- UV5663

Exhibit 1

BEN & JERRY’S HOMEMADE: THE UNILEVER SCOOP Ben & Jerry’s Stock Price (NYSE) Before Acquisition

(in U.S. dollars)

Data source: Bloomberg Financial Markets.

Ben & Jerry’s and Unilever Stock Prices (NYSE), April 6–18, 2000 (in U.S. dollars)

Data source: Bloomberg Financial Markets.

20

25

30

35

40

45 Announcement date 4/12/2000

14.4

14.6

14.8

15

15.2

15.4

15.6

0 5

10 15 20 25 30 35 40 45 50

U ni

le ve

r st

oc k

pr ic

e

B en

& J

er ry

's st

oc k

pr ic

e

Ben & Jerry's Unilever

Announcement date 4/12/2000

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-6- UV5663

Exhibit 2

BEN & JERRY’S HOMEMADE: THE UNILEVER SCOOP Unilever Financial Data on Ice Cream and Beverage Category

(in millions of euros)

Turnover Operating

profit

Global ice cream

market value 1999 6,769 574 26,715 20001 7,823 367 31,030 2001 7,838 464 34,394 2002 7,456 569 37,449 20032 6,994 1,024 32,752 2004 6,286 709 28,282 2005 6,373 767 30,769 2006 7,578 900 31,266 2007 7,600 809 32,679 2008 7,694 915 33,811 2009 7,753 731 35,000 2010 8,605 724 —

Data source: U.S. Securities and Exchange Commission (SEC) Form 20- F, Unilever filings for 2001, 2003, 2006, 2008, and 2010, and Datamonitor, “Industry Profile: Global Ice Cream,” December 2004, 2005, and 2010.

1 The company said that increased price competition, particularly in North America, was responsible for a drop

in profits (Unilever SEC Form 20-F, 2000, 18). 2 The company explained that turnover dropped because of currency rate of exchange movements (Unilever

SEC Form 20-F, 2004, 33). It also said ice cream had a strong year because of warm weather, the addition of soft- serve out-of-home products, and lower carbohydrate ice cream products.

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