Ben & Jerry: Case Study
1. How has Ben & Jerry’s fulfilled its mission statement?
Ben & Jerry’s has 3 dimensions on its mission statement:
* Product: Ben & Jerry are making and distributing the finest quality of all natural ice cream with innovative flavors. For example they created Chocolate Fudge Brownie flavor but also Chubby Hubby, Chunky Monkey and Bovinity Divinity, which all are innovative and creative flavors with original names.
For instance, they successfully avoided to ship back an amount of frozen brownie, a decision that you have both hurt Ben & Jerry and the supplier and created a new flavor with the frozen brownie.
* Economic: In 1994 ...view middle of the document...
For example, with the Rainforest Crunch flavor, they used cashews and Brazil nuts and avoided to cut trees down.
Thanks to their mission statement, Ben & Jerry were able to ensure their product, economic and social values and run a profitable and growing company.
2. How did Ben & Jerry’s become a takeover target?
Their financial statements were doing better and better from 1994 to 1999. They went from a negative 1.9 million net income to a positive 8 million.
But the case stated that Ben & Jerry should have a higher return on stock because they have a great brand name, 45% market share of the super premium ice-cream market, they launch successful new products and do their most for international expansion. But compared to their competitors, their Price/Earnings ratio was 19.8, under average. The average was 23.92 and the highest in the industry was showing a 47.2 Price/Earnings ratio.
The Price/Book ratio of Ben & Jerry was 1.8, also under average but mainly because the highest (Dreyer’s Grand) had a 7.8 Price/Book ratio.
Theses numbers are below expectations because of the company charitable donation policy, which is 7.5% of pre-tax earnings and Ben & Jerry are not successful to create value (this is why their ROE is low).
The potential buyers know that if they have control of the company, they can get rid of the charitable donation policy and create value.
3. What might Ben & Jerry’s be worth if its mission was purely economic?
A company from a shareholder’s point of view is measured by how much can a company make for the shareholder. In the last 2 years, Ben & Jerry’s offered a return of 5% and 7% and was going to provide a 9% return in the current year. Compared to the return of the Treasury bill which is guaranteed and around 5%, Ben & Jerry’s offers a low return. Ben & Jerry’s are not economically focused and thus the shareholders are taking more risk than with an economic orientated company. If Ben & Jerry focused on the economic mission, it would avoid some risk and increase the return.
4. Should Morgan support a takeover? If so, which offer? If not, impact?
Ben & Jerry being an independent company facing pressure from competitors as well as...