Analysis Of The Ice Cream Industry 32471q

ANALYSIS OF THE ICE CREAM INDUSTRY

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Team B: Elizabeth Gardner, Vandy Figueroa, Emily Garcia, Bradley Kamdem-Fewo Jennifer Kim, Alyssa Franco, & Korin Koerwitz

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RESOURCES & TECHNOLOGY Ice cream has been around since the second century B.C. and has evolved from honey and nectar flavored snow into a smooth blend of cream, milk, sugar, and various other ingredients (IDFA 2014). The majority of firms today use guar gum to limit ice crystal growth in the product and promote a soft and creamy texture. Alternatives include cellulose gum or tara gum (Gum Technology 2009).

Ice cream firms require state-of-the-art equipment and high-tech machinery for pasteurization/homogenization, churning and mixing, freezing and whipping, packaging, hardening, and storage. These firms have heavy duty batch freezers that are regulated at 10 degrees Fahrenheit or lower.

http://cdn.bluebell.com/the_little_creamery/o ur_history.html

BREYERS Breyers began in 1866 Philadelphia as an entrepreneurship. William A. Breyer hand-cranked homemade ice cream made from rich cream, pure cane sugar, fruit, nuts, and various other ingredients.

Breyer opened his first retail ice cream shop in 1882. This is an example of a SOLE PROPRIETORSHIP, meaning Breyer was the sole owner who had great decision making power, but limited ability to raise funds and unlimited liability.

Goes to show how a thriving business can evolve from a corner ice cream shop to a successful corporation

His son, Henry Breyer incorporated the business in 1908. By 1926 Breyers® Ice Cream Company became a division of the National Dairy Products Corporation. As a CORPORATION, Breyers was able to outlive the founder, William A. Breyer, as a collective mass of stockholders who have limited liability and ability to raise money.

William A. Breyer

BLUE BELL Blue Bell Creameries began in Brenham, Texas in 1907 when Washington Country dairy farmers converted a cotton gin into a creamery. By 1992 Blue Bell was the number-two ice cream firm, behind Breyers. Today, it is still among the largest ice cream firms in America. It is a LIMITED PARTERSHIP with headquarters in Brenham, Texas. Easy to organize, it operates on team production and specialization of labor. Partnerships have complicated decision making and unlimited liability.

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E. F. Kruse, general manager in 1919, is credited with reversing the creamery's declining fortunes after business failed to expand.

http://benekeith.com

HÄAGEN DAZS It all began in the 1920s when Reuben Mattus peddled ice cream pops along the New York streets in a horse drawn carriage to help the family ice cream business. As he got older Reuben had a new vision for ice cream so Reuben and his wife Rose began a new brand named Häagen Dazs. Häagen Dazs opened its first retail store in Brooklyn, New York on November 15, 1976. Reuben remained SOLE PROPRIETOR until 1983 when he sold the company to the Pillsbury Company, now part of the General Mills CORPORATION.

Reuben Mattus, founder of Häagen Dazs

BEN & JERRY’S Ben & Jerry's began as a PARTNETSHIP in the 1970's. They had known each other since childhood and moved to Vermont with the idea to start a business. This brand of firm organization relies on team production with unlimited liability and complex decision-making.

They borrowed $4,000 but used $12,000 in investment and opened an ice cream shop in a renovated gas station. The first 3 years they did not make profit until they discovered that if they gave half an ounce less of ice cream they would make profit. As of August 3, 200 Ben & Jerry's became a wholly owned subsidiary of Unilever. Ben and Jerry currently own 42% of voting stock.

BEN Cohen & JERRY Greenfield met during 7 th grade gym. They were “the two slowest, fattest kids in class…” (theindepen dent.co.uk).

Häagen Dazs

TECHNOLOGY

-”The most used methods of technological advancement by the company are the online MARKETING and digital MEDIA.”(Roviralta 6) Häagen Dazs is very active in the field of marketing which increases their popularity and has showed to produce good results. In the SHORT RUN this is positive because Häagen Dazs has been dominating the marketing market but they also need to able to look LONG RUN and make sure that their marketing skills are always up to speed with competitors.

Ben & Jerry -This company has focused the most of its technological effort on finding ways to keep the ice cream in good conditions when it is travelling on trucks or just when it is conserved. Because the company has been accused of not being so GREEN, especially when they are conserving or transporting ice cream, they came up with a new technology which is a thermo-acoustic CHILLER. This chiller will keep the ice cream cool using sound waves (Ken Brown). This cooler will obviously use a lot less technology and help the image of Ben & Jerry has a company that is more eco-friendly. This is another method of marketing that is used by them because they don’t want people to find a reason to not buy their products and be able to get to has many clients as possible.

TECHNOLOGY

C O N T.

Blue Bell -Blue Bell has also tried to improve the transportation of the products but not like Ben & Jerry did. Blue Bell has tried to make the transportation more efficient by updating programs and methods. According to TRM, Blue Bell has 668 delivery routes with 1534 vehicles. With the new programs they have installed they are able to have maintenance on the vehicles and have data that is stored for every single trip so they can find areas of improvement. This is obviously very helpful for them because they are able to find areas that are maybe making them waste money and they can save that money.

Breyer -This ice cream company has made improvements in the technological side of making ice cream. The machines they use have improved a lot and have become a lot more efficient. They now use machines that work better faster and that use less energy. Thanks to the machines Breyer is able to use less energy and produce more ice cream which obviously reduces the cost.

PRODUCTION PROCESS/ RESOURCES Häagen Dazs Häagen Dazs has a very special way of producing ice cream and making sure that the customers enjoy it. This company asks customers for new flavors for packaging options and for new ideas concerning the ice cream. (Roviralta 11) Each place in the world where the ice cream is sold there are dif ferent types of ice cream available because of the demand of the clients. This is a smart tactic, because they are able to maximize the selling of ice cream since they adapt to the customers. Ben & Jerr y This company has a very unique way of production. According to the Ben & Jerry of ficial website They have companies across the country that they get their milk from and they only get the milk from those farms. The milk is then turned into cream and transported across the country. When it arrives at the factory it is conserved and then turned into ice cream. This guarantees the customers quality products because they know where the milk comes from, and all the milk is guaranteed to be top quality. Blue Bell Blue bell has used technology a lot in the production process. They have found sof tware and programs that make labor a lot easier and a lot more ef ficient. Programs like Maximo 5.2 have saved around 15000 man hours in a year (TRM). This is an huge number and it allows the production process to be a lot quicker and to also be a lot cheaper for the company.

Breyers This company has a reputation of using a small amount of all natural ingredients in the ice cream. This benefits the company because it allows them to cut a lot of the cost. The only problem is that many customers have been unhappy about the ice cream because they said it could not even be called ice cream anymore since there was not enough natural ingredients in it. This has been an issue in production for Breyers because many customer have stopped buying their products due to that problem.

THE FLAVORS

COMPETITION  Häagen Dazs stresses it is ‘made like no other.’  Blue Bell says it is the ‘best ice cream in the country.’  In a monopolistic competition market firms need to aggressively their products to appeal to a mass of ice cream -loving consumers. They hire actors to endorse their products. They produce expensive commercials. They also have sales. All these promote market share enhancing.

www.thecouponhigh.net

GEOGRAPHIC LOCATION

Blue Bell  Anyone in the United States can order any flavor online and have it shipped to their house in the U.S.  It is also available throughout the states of Texas, Louisiana, Mississippi, Alabama, Arizona, Arkansas, Florida, Georgia, South Carolina, Tennessee  Available in some parts of New Mexico, Oklahoma, Kansas, Missouri, Kentucky, Indiana, North Carolina, Virginia, Colorado and Wyoming.

Häagen Dazs  H ä a g en D a z s  In North and South America  Aruba, Brazil, Cayman Islands, Costa Rice, Dominican, Republic, Jamaica, Mexico, Panama, Puerto Rico, St. Martin, Trinidad.

 In Europe:  Austria Belgium, Canary Islands, Cyprus, Czech Republic, , , Greece, Holland, Hungary, Luxembourg, Monaco, Poland, Portugal, Republic of Ireland, Romania, Spain, Turkey, United Kingdom.

 In Asia:  China, Guam, Hong Kong, India, Indonesia, Macau, Malaysia, Philippines, Singapore, Korea, Taiwan, Thailand.

 In Africa:  Morocco, South Africa.

 Middle East:  Egypt, Kuwait, Lebanon, Qatar, Saudi Arabia, United Arab Emirates.

 You can order them and have them shipped to the U.S. and the U.K .

Faloodeh: Persian frozen dessert made with thin vermicelli noodles frozen with corn starch, rose water and lime juice. Popular in Iran .

GEOGRAPHIC LOCATION

Ben & Jerry’s  You can order Ben & Jerry’s and have it shipped to any state in the U.S.  You can also go to a shop or get it at a store in the following:  Aruba, Australia, Austria, Canada, Czech Republic, Denmark, Finland, , , Greece, Ireland, Israel, Italy, Japan, Mexico, Netherland, Netherlands, Antilles, Norway, Portugal, Puerto Rico, Singapore, Spain, Sweden, and United Kingdom. http://www.travelchannel.com

Breyers  Any state in the United States and Puerto Rico *Ice cream is popular ALL OVER THE WORLD. Check out this Japanese Mochi ice cream, made from sticky rice balls pounded into soft, marshmallow-like texture and fused with flavors such as green tea or red bean!

COST MINIMIZING STRATEGIES BLUE BELL  Some competitors have slimmed down the size of their ice cream containers to maintain profit margins, Blue Bell asserts that its ice cream will retain its true half-gallon size. And to keep its customers coming back for favorite flavors while trying new ones each year, the creamery boasts an active product development group that churns out new flavors, such as its Rocky Mountain Road. Blue Bell in 2014 began distributing ice cream in the Las Vegas area. The Blue Bell company keeps their cost minimization by constantly researching other companies to keep current and competitive. In the short run these investments might increase the cost by a lot, but in the long run it will reduce the cost and help increase the sales by a lot.

BREYERS  Due to increasing costs, Breyer s needed to find a way to cut down. The company developed a frozen yogur t and also cut down on a lot of natural ingredients. This way, Breyer s saved on money without sacrificing the great taste.  Most of their customers don’t really realize that they are eating frozen yogurt rather than ice cream, but Breyers has lost a lot of other customers who complained about the cut back in all natural ingredients.  This goes to show how maximizing profit for the short run can hurt a company in the long run (due to losing customers).

COST MINIMIZING STRATEGIES Häagen Dazs  To cover the costs of shipping the products from the US to the UK and the establishment of the high street shop network, the product was launched in the UK at a price significantly above the US price  By implementing the value chain described above, Häagen Dazs “ignited” the super- ice cream sector in the UK, accessed a new and much higher price  Industry average costs of goods sold typically ed for 62% of sales, with some variation expected for different strategies. Unilever, for example, typically had advertising spend of up to twice the industry average.  Haagen Dazs uses the valued-based price strategy and the new high end approach for selling ice cream to the general public. (Roviralta 13) To maximize their profit, the company relies on their relationship with their customers and strives on building a strong bond with the client to get better sells. They also try to use promotions and discounts In the short run this can be a little expensive for Häagen Dazs because of all the promotions and discounts, but in the long run they should get even more money back from all the customers appreciation of the product and of the brand.

COST MINIMIZING STRATEGIES BEN & JERRY’S

In monopolistic competition the quantity of output that achieves the greatest difference of total revenue over total cost is profit maximization

Ben & Jerry did not make any money the first 3 years. After a while, they came to the realization that they were over-scooping. “If you over-scoop by half an ounce, your profit is gone.” They corrected the problem (Greenstreet 20). Ben & Jerry’s is an innovative leader in the super ice cream industry. The company blends a commitment to provide all natural, high quality ice cream with a commitment towards social activism and environmental responsibility. This company has put more of their focus on the saving money on production. Thanks to technological advancements they have been able to reduce the cost of production and have less ingredients wasted. According to Infinity QS they have implemented a new program called Infinity QS Proficient which has helped the company with identifying places that were not running efficiently enough and to reduce the waste by a lot. This is an investment that will help the company in the long run and in the short run since it allows them to maximize the usage of all the ingredients they use to make ice cream. They are constantly changing and adjusting prices to be competitive with other ice cream corporations. It requires research and “spying” But of course people hire people to do that! http://www.amosweb.com/images/MsMc40c.gif

REVENUE & PROFIT Revenue

Profit

# of Employees

Blue Bell (6/16/14)

$500,000,000 ($500 million)

$300,000,000 ($300 million)

2,800

Breyers (2014)

$11,000,000,000 ($11 billion)

$8,000,000,000 ($8 billion)

15,000 (US and Puerto Rico)

Häagen Dazs

$700,000,000 ($700 million)

$450,000,000 ($450 million)

350,000 (worldwide)

Ben & Jerry’s (3/20/2014)

$132,000,000 ($132 million)

$100,000,000 ($100 million)

446 (according to statistica.com)

Revenue is the total amount of money a company receives during a given period. It is calculated by price multiplied by units sold. Profit is how much money the company actually made. This is calculated by subtracting total costs from the revenue. (P = R – TC)

The total U.S. market size for the Ice Cream & Frozen Dessert Manufacturing industry

Market Size ($ Billions)

Revenue Per Firm ($ Millions)

*Overview of the general frozen dessert market

2008 2009 2010 2011 2012 2013

2008 2009 2010 2011 2012 2013

http://www.anythingresearch.com/industry/IceCream-Frozen-DessertManufacturing.htm#currentstate

http://www.bluebell.com/IceCreamFlavor ?fid=12

MARKET STRUCTURE  The Ice Cream Industry is similar to a MONOPOLISTIC COMPETITIVE market:  There are many firms who compete with each other.  Ice cream products are similar, but not identical.  For example, Häagen Dazs produces indulgent and decadent blends like white chocolate raspberry truffle, while Blue Bell Creameries specializes in home -style flavors such as Peaches & Homemade Vanilla. Even though all firms produce a vanilla flavor, every recipe is slightly altered to produce a unique and differentiated flavor.

http://www.haagendazs.us/P roducts/Product/2479

ADVANTAGES

 Market ENTRY AND EXIT in a monopolistic competitive market is accessible. This is due to low entry and exit barriers.  Ex: If an ice cream firm is making positive profits in the short run, other firms are able to enter the monopolistic competitive market and compete as well.

 An Ice cream firm is able to be a PRICE MAKER instead of a price-taker, since the products are dif ferentiated.  Ice cream firms become INNOVATIVE in order to create dif ferentiated products which is good for the consumer.  Ex. Ice cream firms are constantly experimenting with new flavors and techniques to appeal to consumers.

DISADVANTAGES  Ice cream firms face competition from other ice cream firms in the industry and may need to go to great lengths to aggressively their product.  Markets that are monopolistically competitive are productively INEFFICIENT because price lies on the downward sloping portion of the average cost curve.

http://johnmichaelsgoodeats.com

http://stylefrizz.com

Elasticity of Demand

At $5/quart, the quantity demanded is 6 quarts, represented by point A on the chart. If the price were to increase to $10/quart, the quantity d e m a n d e d b y yo u would decrease to 1 quart (point B). If the price decreases to $2/quart, the quantity d e ma n d e d b y yo u would be 9 quarts (point C).

Shift in Demand Graph

Ice cream is considered relatively elastic, since a change in one variable (such as weather) can dramatically change another variable (such as quantity demanded). 1 < E < ∞

If it were an extremely hot s u m m e r, yo u would most likely consume more ice cream, even if the price remained at $5/quart. This w o u l d c a u s e yo u r demand curve to shift out, represented by line D. The increase in temperature shifted demand outward, resulting in an increase in quantity demanded at all price points relative to the quantity demanded d u r i n g a t yp i c a l s u m m e r. A t $ 5 / q u a r t , yo u would consume 8 quarts (point B) as opposed to 6 (point A), creating an outward shift in demand.

CIRCULAR FLOW MODEL

The households buy the products from the firms (ice cream). This is how the firms make revenue. They then pump it into the factor markets by hiring employees to work at their factories. The households supply the labor, and the firms (as employers) pay them. Then households use the money they earn to buy the product (ice cream).

Production Possibilities Frontier An Ice Cream Firm PPF Model displaying vanilla flavored ice cream production and chocolate flavored ice cream production

CHOCOLATE ICE CREAM inefficient

efficient impossible

VANILLA ICE CREAM

Opportunity cost s for the next-best forgone alternative.

The PPF model line shows the tradeoffs of producing dif ferent products. Because the production of chocolate and vanilla are s i m i l a r, t h e l i n e is constant instead of bowed out. This is because there is low opportunity cost, since vanilla and chocolate cost the same (about $4.00 for 1.5 quarts). The blue line shift implies firm’s growth. For this company to remain suf ficient, the points of production should fall along the line. Beyond the line is impossible. Under the line is inef ficient.

DEMAND & SUPPLY New equilibrium Old equilibrium

Quantity demanded is what consumers want. Quantity supplied s for the amount of product firms can provide. Ice cream is a normal good.

Law of demand: As price increases, demand decreases Law of supply: supply increases as price increases

SUPPLY & DEMAND

C O N T. Compliments: Ice cream cones, whipped cream, chocolate syrup, and caramel are all compliments to the ice cream market. When the price of ice cream decreases, quantity demanded of these products increase.

EoD = (% Change in Quantity Demand for Good X)/(% Change in Price for Good Y)

Cross elasticity between ice cream and caramel would be positive, since they are compliments. Cross elasticity between ice cream and pie would be negative, since they are substitutes.

http://www.biz-development.com

Substitutes: Pies and cakes are alternatives to ice cream. The demand for pie increases during the winter months as the demand for ice cream decreases.

In Conclusion… Blue Bell, Breyers, Häagen Dazs, and Ben & Jerry’s are successful franchises that bring unique, differentiated products to the market. Ben & Jerry’s products are bursting with giant chunks of just about anything you can think of and continues to invent the most outrageous original concoctions with the cleverest names. Häagen Dazs promises the richest, most decadent blends of sweet indulgence. Blue Bell produces good ol’ homemade ice cream that appeals to nature of the American spirit. Breyers provides a wide array of flavors and and is forever reliable. They have different techniques, different tastes, different styles, and different stories. That is the beauty of the market. There is room for new companies to enter, innovate, grow, expand, and cater to the customer. Any firm has the chance to rise from anonymity to marketability and become the cream of the crop.

Resources Breyers. Breyer’s Rich History. Unilever Ice Cream (2014). Retrieved from http://www.breyers.com/home/about. Web. 26 June 2014. Guar Gum Replacements. Gum Technology by Coyote Brand (2009). Retrieved from http://www.gumtech.com/products/GuarReplace.php . Web. 24 June 2014. Häagen Dazs. Made Like No Other. Retrieved from http://www.haagendazs.us/Learn/History/. International Dairy Food Association. The History of Ice Cream. IDFA (2014). Retrieved from http://www.idfa.org/newsviews/media-kits/ice-cream/the-history-of-ice-cream. Web. 25 June 2014. Taylor, John B. Principles of Microeconomics, Second Edition. (2011). Greenstreet, Rosanna. How We Met: Ben Cohen and Jerry Greenfield (28 May 1995). The Independent. Retrieved from http://www.independent.co.uk/arts-entertainment/how-we-met-ben-cohen-and-jerry-greenfield-1621559.html. Web. 25 June 2014. Statistic Brain. Ben & Jerry’s Ice Cream Statistics (20 May 2014). Retrieved from http://www.statisticbrain.com/benand-jerrys-ice-cream-statistics/. Monopolistic Competition, Profit Maximization. AmosWeb (2000-2014). Retrieved from http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=monopolistic+competition,+profit+maximization. Blue Bell Creameries, L. P. Vault (2014). Retrieved from http://www.vault.com/company-profiles/food-beverage/bluebell-creameries,-lp/company-overview.aspx. Web 27 June 2014. http://www.slideshare.net/JakeRoviralta/hagen-dazs-pdf