Ben & Jerry's: Japan: Strategic Decision by an Emergent Global Marketer

Author(s): James M. Hagen

Source: Journal of International Marketing, Vol. 8, No. 2 (2000), pp. 98-110
Published by: American Marketing Association
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Educator Insights:
Ben & Jerry's?Japan: Strategic Decision

by an Emergent Global Marketer

ABSTRACT Marketing students thrive on identifying an ideal foreign market

for a product and devising a plan to launch and promote the
As as the plans may be, though, resources are
product. elegant
constrained, and firms that are just emerging in the global mar
may have a constrained range
ketplace correspondingly of op
tions available. The decision of Ben & Jerry's whether to enter
the Japanese market?and if so, how?illustrates the strategic

thinking behind such a constrained decision, focusing on an in

creasingly feasible option of partnering with a single retailer for
the market entry. The case covers a wide
spectrum of strategic
issues faced by a branded consumer goods manufacturer in the
early stages of venturing beyond its domestic market. Students
can assume the role of the chief executive officer in (1) balanc
ing the attraction of a potentially strong market against the
mission and resources of the firm, (2) balancing the lack of
resources (both financial and managerial) for a company
controlled brand-building strategy against the apparent haz
ards in granting brand development rights to a licensee, (3)
making the best of the increasing consolidation and strength of
the retailer sector, and (4) developing trust with a local partner.

Itwas fall of 1997, and Perry Odak was just entering his tenth
James M. Hagen month as chief executive officer (CEO) of the famous ice
cream company named for its offbeat founders, Ben & Jerry's.
Far from company headquarters in Vermont, he was setting
The Japan Entry Decision down his chopsticks in a quiet Tokyo restaurant to give full
attention to the staff he had brought with him: the company's
newly appointed head of international, the head of produc
tion, and a trusted expert on Japan. The question on the table
for this group was whether to enter the Japanese market by
a license to an
granting countrywide enterprising Japanese
American, to enter the market a convenience store
by giving
Submitted July 1999
chain exclusive rights to carry Ben & Jerry's products in all of
Revised December 1999 its 7000 or to pass on to enter the Japanese mar
stores, trying
January 2000
ket for the upcoming summer 1998 season. The decision was
? Journal of International Marketing
Vol. 8, No. 2, 2000, pp. 98-110
not isolated; rather, those involved had to consider the very
ISSN 1069-031X
history and mission of this well-known company.

Brooklyn schoolmates Ben Cohen and Jerry Greenfield

Company Background started their ice cream company in a defunct gas station in
Vt., in 1978, when both were in their mid-20s.
Burlington,
The combination of their anticorporate style, the high fat

98
content of their ice cream, the addition of chunky ingredi
ents, and flavor names, such as Garcia, found a
catchy Cherry
following. In addition to selling by the scoop, they began sell
ing pints over the counter, and the business grew. The com

pany went public in 1984 and came to be traded over the

counter with the symbol BJICA.

Cohen and Greenfield determined that their company would

be socially responsible, and as part of its objective of "caring
capitalism," Ben & Jerry's committed to giving 7.5% of pretax
profits to causes such as the Center for Better Living, which
assisted the homeless. The company's mission statement was

organized into three objectives: social, economic (serving

shareholders and employees), and product (producing prod
ucts of the finest quality).

Indeed, the product Cohen and Greenfield were was ex

selling
ceptionally rich (at least 12% butterfat, compared with
approximately 6%-10% for most ice creams). Itwas also very
dense, which was achieved a low overrun (low ratio of air to
by
cream in the finished product). This richness and density qual
ified it as a super premium ice cream. H?agen-Dazs, the only
in the super premium market, a so
major competitor promoted
phisticated image, whereas Ben & Jerry's emphasized the off
beat. The company had eschewed advertising, gaining
invaluable publicity from the press, which could not resist re
on the unusual company and its funky, caring image.
porting

By the late 1980s, the company had three production plants,

and its ice cream had become available in every one of the
United States. The 1990s saw sales increase from $77 million
to $174 million in 1997. The future was not encouraging,
though, as profit peaked in 1993 ($7million) and even went
into negative territory in 1994. Although Ben & Jerry's un
questionably held the second-largest market share (at 34%
with H?agen-Dazs's 44%) of the U.S. super pre
compared
mium market, that share was This a threat
declining. posed
to the very survival of the company and to the continuation
of its social activities. It was time to make a
responsibility
from to professional man
change entrepreneurial leadership
In 1996, Bob Holland, a former consultant with
agement.
McKenzie Corporation, took the presidency, bringing a small
cadre of fellow consultants with him. Holland's relationship
with the board did not work out, and Perry Odak was brought
in as the new CEO in 1997.

Odak was recruited away from a consultancy assignment at

the U.S. Repeating Arms Company, which he had been in
strumental in turning around from its decline into red ink.
This endeavor followed his experience in diverse positions,
which ranged from senior vice president of worldwide oper
ations of Armour-Dial Inc. to president of Atari Consumer

Educator Insights: Ben & Jerry's?Japan 99

 Products, along with several consultancies and entrepreneur
ial activities, including the start-up team and management of
a
Jovan, fragrance and cosmetic company. Ben & Jerry's hired
Odak as a manager who thrived on
professional challenges.

In 1997, almost 10% of U.S. milk production went into ice

The Domestic Market for cream, a $3.34 billion market for store sales. Although Ben &
Super Premium Ice Cream Jerry's had just 3.6% of the market (the biggest share of the
market, at 30.2%, came from the retailers' labels
private
the company's was its super
products), competitive strength
ice cream. Its share in that category was 34% (com
premium
pared with 44% for H?agen-Dazs) of the $361 million of su
permarket sales. Both companies derived additional sales
from sorbets, frozen yogurts, and novelties. H?agen-Dazs had

pioneered the super premium category back in 1961, when

Reuben Mattus founded the company in New Jersey. The
company was later acquired by the giant food company Pills
bury, which in turn was bought in 1989 by the U.K. liquor
and food giant Grand Metropolitan, which itself later com
bined with Guinness to form Diageo.

There are considerable economies of scale in ice cream pro

duction. Market leader H?agen-Dazs had just two plants in
the United States, whereas Ben & Jerry's had three. Even with
few Ben & Jerry's was operating at approxi
relatively plants,
mately half of plant capacity in 1997. The two companies
had achieved national distribution, primarily selling their
in supermarkets and convenience stores. Also, Ben &
product
Jerry's had 163 scoop shops, compared with 230 for H?agen
Dazs. Prices for Ben & Jerry's and H?agen-Dazs ranged from
$2.89 to $3.15 per pint, often more than twice the price of
conventional and premium ice cream products. Considering
that Ben & Jerry's was already available in all fifty U.S. states,
itwas apparent that future growth would have to come from
new or from new (non-U.S.) markets.
products

Ben & Jerry's was intentionally slow to embrace foreign mar

Ben & Jerry's kets. Cohen was opposed
to growth for growth's sake, so the
International Sales company's few adventures overseas were limited to oppor
tunistic arrangements that came along primarily through his
friends. Meanwhile, H?agen-Dazs had no such hesitation. By
1997, was in 28 countries and had 850 scoop
H?agen-Dazs
around the world. Its non-U.S. sales were an estimated
shops
$700 million, compared with approximately $400 million in
domestic sales. Ben & Jerry's, in contrast, had foreign sales of

just $6 million and total sales of $174 million. In terms of

non-U.S. super ice cream sales, H?agen-Dazs and
premium
Ben & Jerry's were still the leading brands, but H?agen-Dazs
was trouncing Ben & Jerry's.

Ben & Jerry's made its first foreign entry in 1986, when the
company gave a Canadian firm all Canadian rights for the

200 James M. Hagen

manufacture and sale of ice cream a agree
through licensing
ment. High Canadian tariffs and quotas made export into that
market impractical, and the business did not thrive. In 1992,
Ben & Jerry's repurchased the license, and as of 1997, there
were just four scoop in Quebec. In the next en
shops foreign
try, Avi a friend of Cohen's, was given a license, in
Zinger,
cluding manufacturing rights, for the Israel market in 1988.
His 1997 sales totaled approximately $5 million, but the only
revenue accruing to Ben & Jerry's Homemade Inc. was licens

ing income, and this amount was negligible.

The most famous was to Karelia,

company's foray abroad
Russia, in 1990. This was a joint venture that grew out of Co
hen's travel to Karelia as part of a sister-state delegation from
Vermont in 1988. Ben & Jerry's had a 50% ownership share,
contributing equipment and know-how to the venture,
whereas the local partners provided the facilities for the fac
tory and for two scoop shops. After considerable delays, the
shops opened in July 1992. Although the operation had
grown, Ben & Jerry's terminated the joint venture in 1996,
giving its equity and equipment at no cost to its Russian part
ners. Ben & Jerry's management believed that the attention re

quired of it to keep the partnership going was too demanding

given the likely benefit to the company. The remaining oper
ation no longer uses the Ben & Jerry's name, though it does
continue to make ice cream.

In 1994, after much discussion, the consensus at Ben & Jerry's

in Vermont was that the company was not
headquarters ready
to move into international markets strategically (rather than
just opportunistically). Nevertheless, the company shipped a
container of product to Sainsbury, an
upscale supermarket
chain in the United Kingdom, in response to a request from a
Sainsbury executive whom Cohen had met at ameeting of the
Social Venture Network. This launch lacked any considera
tion of pricing or knowledge of what kind of packaging and
were in the market. A distributor was
ingredients acceptable
engaged, though, and by 1997 annual U.K. sales
eventually
had reached $4 million.

In 1995, the company made a rather entry into France.

halting
The company sent off a container of product to Auchan, an
other major retailer to which Cohen was introduced through
Social Venture Network ties. As global protests grew over
French nuclear testing, though, there were discussions in the
company about withdrawing from the French market and
protesting the French government's actions. If this were not
awkward there was no no promo
enough, marketing plan,
tional support, and no attempt to address French labeling
laws. French sales in 1997 were just over $1 million. Ben &
into the Benelux market was also without strate
Jerry's entry
gic planning. In this case, a wealthy individual who had ad

Educator Insights: Ben & Jerry's?Japan

 mired the company's social mission asked to open scoop
shops, with partial ownership by the Human Rights Watch.
By 1997, there were three scoop shops in Holland. Sales to
taled a mere $287,000, but there were prospects for future
store sales.

In short, Ben & Jerry's fell into several foreign markets oppor
not as part of a strategic The company had
tunistically, plan.
never developed a conventional marketing plan in the
United States, and it lacked the commitment and managerial
resources to put together a for entering
marketing campaign
the markets. As a result, 1997 Ben & Jerry's inter
foreign by
national sales were just 3% of total sales. Although the com
pany had nearly caught up with H?agen-Dazs in U.S. market
share, H?agen-Dazs was ahead in the non-U.S.
light-years
markets. Given declining profits and domestic market share
at Ben & Jerry's, it seemed to be time to give serious attention
to international market opportunities.

In the 1994-96 period, when Ben & Jerry'swas having its first
Opportunities in Japan taste of a professional CEO, it struggled with the prospects of
targeting a foreign market and a mar
strategically developing
keting plan for its fledgling overseas operations. In particular,
the company made inquiries about opportunities in Japan,
the world's ice cream market, with annual
second-largest
sales (including food service) of approximately $4.5 billion.
The market was not only big but also daunting. Japan was
known to have a highly complex distribution system driven
its barriers to foreign were
by manufacturers, products high,
and the distance for shipping a frozen was immense.
product
Ben & Jerry's would be a late entrant, more than ten years af
ter H?agen-Dazs a foothold in the market. In addition,
gained
there were at least six Japanese ice cream manufacturers sell

ing a super premium product there.

Despite the challenges of entering Japan, that market had sev

eral features. consumers were known
compelling Japanese
for demanding high-quality products with great varieties of
styles and flavors (ahallmark of Ben & Jerry's), and it seemed
that a
dietary shift the country was undergoing toward more
animal was still under way. By 1994, 42
products Japan's
annual per of milk was less
kilogram capita consumption
than half that in the United States (103 kg.), and cheese con
sumption was approximately one-tenth that in the United
States. Incomes in Japan had increased dramatically since
the 1950s, so animal-based food and home refriger
products
ators had become affordable to the population.

Although H?agen-Dazs did not disclose financial data, mar

ket intelligence suggested that the ice cream maker had sales
in Japan of approximately $300 million, and Japan provided
the highest margins of any of its markets. The retail price for

102 James M. Hagen

one pint of H?agen-Dazs was approximately $6.00, and the
brand had managed to capture an estimated half of the super
premium market in Japan. It entered the market as an im
ported product, and later began production in Japan at a
plant co-owned with Japanese partners. Approximately 25%
of H?agen-Dazs's sales there appeared to be from scoop
shops, which were an important vehicle for introducing the
product and positioning it as high in quality. The market
seemed to welcome imported ice cream, and expectations of

falling tariffs on dairy products suggested increasing oppor

tunities for ice cream imports from abroad, especially consid

ering that dairy production was much more costly in Japan

than in the United States.

If Ben & Jerry's could capture some of the market, it appeared

that adaptations would primarily be in packaging. Desserts at
the family dinner table were uncommon in Japan, and ice
cream was left primarily for the snack market. Not surpris
ingly, single-serving cups had become popular, accounting for

approximately 45% of sales. By 1993, approximately a quar

ter of all ice cream sales were in convenience stores, where
sales were continuing to grow, compared with 29% in super
markets. H?agen-Dazs's flavors in Japan were generally the
same as its U.S. flavors, with minor modification.
relatively

When asked whether Ben & Jerry's should enter Japan, stu
dents can
readily identify several considerations, whereas Educators' Note: Deciding
others may not be so apparent. In support of entry, the market Whether to Enter the
is strong, with excellent That Ben & Jerry's
growth potential. Japanese Market
is a relative latecomer may seem but the poten
problematic,
tial growth in the market lessens that concern. More impor
tant, Ben & Jerry's can enter with assurance that there is a
market for its product and without needing to educate con
sumers about the category. The market thrives on new intro
ductions, which suggests potential for Ben & Jerry's to chip
away at H?agen-Dazs's share. Although a micro look at mar
kets in Japan may be positive, the students could be encour
to undertake research to an of
aged enough gain impression
the Japanese economy at the time. July 1997 was when the
Thai currency depreciated, which sent a ripple effect of fi
nancial crisis through the Asian economies. The Japanese
economy had already been languishing, and there was no
sign of recovery. On the positive side, small, affordable luxu
ries can do well in times when major luxuries move beyond
the reach of consumers.

Is it better to fix the markets you are already in before going to

a new market? but a counterargument is that it may
Perhaps,
be easier to build from scratch than try to undo and fix past
mistakes. Potential market sizes again are an issue here, and
the potential in Japan vastly exceeds that in any other single
export country. One question that looms large iswhether Ben

Educator Insights: Ben & Jerry's?Japan 103

 & Jerry's had the financial or managerial resources to develop
and nurture the Japanese market properly. The company's
past experience has shown that markets do not develop by
themselves. Itwould take the time of top management as well
as staff in Japan to garner a share of the market.
meaningful
The market slippage in the mid-1990s had already suggested
that the company could no longer rely on free publicity to
build demand for its products. In particular, the Ben & Jerry's
brand was unlikely to generate sufficient publicity in Japan to
launch successfully without advertising.

A strategic consideration, which students might not think of,

is the importance of giving H?agen-Dazs serious competition
in this huge market where the company was earn
reportedly
ing its highest margins?margins that could fuel attacks
against Ben & Jerry's back in the United States and anywhere
in the world. By staying out of Japan, Ben & Jerry's had been
giving a tremendous source of profits.
H?agen-Dazs

Students may already have studied alternative modes of for

eign market entry, including export on the one hand or over

seas production by licensing, contract or foreign
production,
direct investment on the other hand. In the present case, Ben
& Jerry's is concerned about its excess capacity and has so far
restricted its milk supply to Vermont. Attention for class dis
cussion can focus on the alternative. As the
quickly export
product would be exported from the United States, there
would be the risk of negative exchange rate movements that
could make exports to Japan no longer feasible. Similarly,
commodity risk was also a serious concern, in that the price
of milk could rise in the United States, which would hurt Ben
& Jerry's relative to competitors with production in Japan.

The Ben & Jerry's case provides an opportunity to highlight

that managers making market entry decisions must consider
the people involved and the very personality of the company.
Social mission is of particular importance to Ben & Jerry's,
and Cohen had reservations about a strategic into a new
push
market for which no social mission had been identified.
Odak, in contrast, had been hired to make the company
thrive, and his personal success would on immediate
depend
successes in sales, profit, and stock price growth.

Upon assuming the presidency, Odak inherited a file of notes

Focusing on Two related to Jerry Greenfield's study trip to Japan a year earlier.
Alternative Strategies In a whirlwind tour, Greenfield had met with trade represen
for Entering the tatives and possible distributors, including Amway Japan,
two an existing ice cream distribu
Japanese Market Japanese dairy companies,
tor, the master franchiser for Japan of Domino's Pizza, and the
head of the 7-Eleven convenience store chain in Japan. Be
cause of managerial turmoil at its headquarters, though, Ben &
not of the options. The re
Jerry's had pursued any incomplete

104 James M. Hagen

 search file suggested that Amway was a bad fit, and one of
the dairy companies was affiliated with the Mitsubishi indus
trial family, which Ben & Jerry's had recently protested on
account of its rain forest logging activities. There was also
nervousness about partnering with possible competitors with
whom the company was not familiar. Although getting on
the shelves of 7-Eleven stores seemed to offer the shortest
(and least costly) distribution channel, there was anecdotal
evidence that the convenience chain could be difficult to
work with because of its sheer market power, its demands for
just-in-time inventory maintenance, and the possibility of its
dropping flavors with little notice. In any event, 7-Eleven
could not be expected to promote the brand. The most viable
alternative seemed to be the Japanese-American entrepreneur,
Ken Yamada, who could build on the success of his American
pizza company by promoting ice cream.

In February 1997, after little more them a month on the job,

Odak had many challenges more immediately pressing than
the Japanese market, though that is when he paid a visit to
The visit was a detour to a long-scheduled va
Japan. actually
cation trip to Thailand with his wife. Ben & Jerry's had not
been represented at the recent top-to-top meeting in the
United States that Southland (the U.S. franchisers of 7-Eleven)
hosted every January with its key suppliers. Ben & Jerry'swas
one of those suppliers. To make up for this, Odak stopped by
Tokyo for a courtesy call toMr. Iida, the President of 7-Eleven
Japan, a controlling parent company of Southland.1

Iida appeared appreciative of this courtesy call at the 7

Eleven headquarters in Tokyo, but after about ten minutes of
pleasantries, he asked Odak point blank: "Is there anyone at
Ben & Jerry's who can make a marketing decision? We'd like
to sell your product in Japan but don't know how to proceed
orwith whom." Rather taken aback at this surprisingly direct
inquiry, Odak replied that he could indeed make a decision,
and he resolved to sort through the Japanese options and get
back to Iida in short order. Back in Vermont, Odak installed
Angelo Pezzani (with whom he had worked years earlier at
Atari) as the new director of international for Ben & Jerry's
Homemade. Pezzani would continue discussions with Ya
mada and simultaneously let Iida know that Ben & Jerry's
wanted to explore options with 7-Eleven.

The Yamada proposal was for Yamada to have full control of

The Yamada
marketing and sales for Ben & Jerry's in Japan. He would po Option
sition the brand, devise and orchestrate the initial launch,
and take care of marketing and distribution well into the fu
ture. He would earn a on all sales in the market. By
royalty
giving Yamada full control of the Japanese market, Ben &
Jerry's would have instant expertise in an otherwise unfamil
iar market, as well as relief from having to address the many

Educator Insights: Ben & ferry's?Japan 105

 issues involved in putting together both an entry strategy and
ongoing market management. Yamada knew frozen foods,
and he had an entrepreneurial spirit and marketing savvy
that was evidenced by his success in launching and building
up the Domino's pizza chain in Japan. Giving up control of a
potentially major market, though, could not be taken lightly.
Because Yamada would invest his time in fleshing out and
executing a after an agreement
marketing plan only reaching
with Ben & Jerry's, there was no specific plan available for
consideration. Even if there had been, Yamada would have
retained the rights to change it. For the short run, however,
Yamada would expect to add selected flavors of Ben & Jerry's
ice cream cups to the Domino's menu, which pro
delivery
vided an to collect market data based on cus
opportunity
tomer response.

To pursue the 7-Eleven option, Odak requested an April

The 7-Eleven Option meeting with Iida in Japan to explore the options. The meet
ing would include Mr. Nakanishi, the head of frozen deserts
for 7-Eleven Japan (and several of his staff members). Odak
would be accompanied by Angelo Pezzani, the new head of
international for Ben & Jerry's, and Bruce Bowman, the head
of operations. To work out arrangements for the meeting,
Odak needed someone on the ground in Japan, and he called
on an American who and
Rivington Hight, spoke Japanese
had been living in Japan for much of the past 30 years. No
stranger to Odak or Pezzani, Hight had also worked for Atari
in 1982, as president of Atari Japan. Similar to Odak and Pez
zani, he had held a variety of management positions and con
sultancies in the years since.

The April meeting in Japan was basically intended to lay the

groundwork for further discussion between the ice cream
manufacturer and the giant retailer. It was a chance for the
critical players in each company to get together. Odak arrived
at this first meeting with more questions than answers, but he
was determined that any product Ben & Jerry's might sell in
Japan would be manufactured in Vermont, where the com

pany had considerable excess capacity. The costs of labor

and raw materials were higher in Japan than in the United
States, enough so that the 23.3% tariff and cost of shipping
did not seem prohibitive. Iida allowed that he would
be interested in putting Ben & Jerry's products in all of
7-Eleven's 7000-plus stores in Japan, in exchange for Ben &

Jerry's making 7-Eleven its exclusive Japanese retail

outlet for a to-be-determined period of time. The introduc

tory meeting went well enough that the two companies

planned subsequent meetings to explore the many details
that would be critical to a successful joint effort.

As mentioned ice cream was seldom consumed

previously,
as a family dessert in Japan, though it had become a popular

106 fames M. Hagen

 snack item. Accordingly, Nakanishi insisted the ice cream be
packaged only in personal cups (120 ml.) and not the 473
milliliter (one pint) size that Ben & Jerry's currently packed.
Meanwhile, H?agen-Dazs was being sold in both sizes in
Japan. Bowman determined that approximately $2 million
worth of new equipment would be needed to produce the
smaller cup. The sizes of some of the ingredient chunks
would have to be reduced so that they would not overwhelm
the small cups. This would require special orders of ingredi
ents to fill any 7-Eleven Japan orders. After some taste tests
by Nakanishi, it appeared that some of the existing flavors
would be acceptable, though their sweetness would need to
be toned down and aminor change would need to be made in
one of the stabilizers.

The approach of 7-Eleven to just-in-time inventory proce

dures would make delivery reliability especially key, and
costs would need to be minimized. Logistics research indi
cated that itwould likely take at least three weeks' shipping
time from one of the plants in Vermont to the warehouse in
Japan. Because of the Japanese labeling requirements, produc
tion quantities would need to match the orders from 7-Eleven

carefully. After the product was packaged, it could not be

shifted to another customer, nor could another customer's

product be shifted to Japan. In addition to legally mandated

changes in the packaging, 7-Eleven wanted to provide its own
design for the package art, and the design definitely would
not include a photograph of Cohen and Greenfield. Nakanishi
wanted conventional descriptive names and packaging that
looked more elegant (more like H?agen-Dazs's).

When itwas established that itwould be at least logistically

possible to fill the 7-Eleven order, the question whether there
would be significant demand for the product deserved a
more considered answer. Iida had said he was interested in
Ben & Jerry's ice cream because it was a new brand in Japan
and its chunky characteristic made it a truly new product. He
knew from direct experience that the brand was successful in
the United States. Moreover, 7-Eleven had tried to get a
company to copack a super premium ice
Japanese chunky
cream, but the Japanese was unsuccessful in its pro
packer
duction processes. Research a clear market for
supporting
this novel in was scant. It seemed unlikely,
product Japan
though, that 7-Eleven would commit shelf space to a product
about which it had any doubt, and both Iida and Nakanishi
certainly knew their market.

The most obvious benefit of entering Japan through 7-Eleven

was immediate placement in the freezer compartments of Educators' Note:
more than 7000 convenience stores in that country. In the Selecting a Market
1990s, the convenience store share of the ice cream Entry Strategy
early
market had increased, and it appeared that these stores now

Educator Insights: Ben & ferry's?Japan 107

accounted for at least 40% of super premium ice cream sales
in Japan. Equally positive was the fact that 7-Eleven had
taken advantage of its size and its state-of-the-art logistics
systems by buying product directly from suppliers, avoiding
the several layers of middlemen that stood between most

suppliers and Japanese retailers. These cost savings could

make the product more affordable and allow a wider margin
to protect such risks as currency fluctuation.
against

On the negative side, if the product were introduced to the

a convenience it were
market through store and just one of
many brands there, would it be able to build its own brand
capital in Japan as H?agen-Dazs had? Would the product es
sentially become a store brand? Without brand capital, it
could be difficult to distribute the product beyond the 7
Eleven chain. Would committing to one huge retail chain be
a case of putting too many eggs in one basket? A falling-out
between Ben & Jerry's and 7-Eleven Japan could leave the ice
cream maker with nothing in Japan. Even during discussions
with Ben & Jerry's, the retailer was known to be terminating
its agreement with the French ice cream manufac
supply
turer Rolland because of allegedly inadequate sales. Presum

ably, 7-Eleven could similarly cut off Ben & Jerry's at some
future date.

A further danger that might extend beyond the Japanese bor

ders was that a in product names and
significant change
could confuse consumers on a basis
package design global
and begin to erode the equity already built up in the brand.
As it happened, this problem was somewhat attenuated be
cause Ben & Jerry's packaging in the United States was al
in the same direction.
ready moving

In going into a partnership, it is critical that both sides win,

and Ben & Jerry's crew gave careful thought to what motiva
tion, if any, 7-Eleven might have beyond the desire to offer a
new
product to lure more customers into its stores. After all,
Ben & Jerry's would not be new forever. A skeptic might
worry that 7-Eleven's interest in bringing Ben & Jerry's to
was that 7-Eleven's combined U.S. and Japanese opera
Japan
tions would become so important to Ben & Jerry's (potentially
accounting for a substantial portion of its sales) that 7-Eleven
could in some fashion control the ice cream maker. Alterna
7-Eleven's reliance on H?agen-Dazs, which
tively, captivated
over half of Japan's super premium market, might be consid
ered. Would 7-Eleven not be in a better position to bargain
with H?agen-Dazs if that brand were being challenged by
close competitor? The distribution channel from H?agen
Dazs to 7-Eleven was not as direct as that from Ben & Jerry's,
so there would be the opportunity of higher margins if sales
could be shifted from H?agen-Dazs to Ben & Jerry's. Also, the
possibility remained that introduction of a new strong brand

James M. Hagen
would help build the category, and super premium was a
high-margin category.

Although Yamada was still very much a contender through

the summer of 1997, one big issue dominated discussions Proceeding Toward
with him: Would he truly earn a margin on all sales in Japan a Decision Point
for some number of years into the future? Yamada would not
be able to develop his marketing plan until he received his
license, and without a plan it was difficult to discuss any
specifics. With prospects of a direct sale to 7-Eleven, the Ya
mada was less attractive to Ben & Jerry's.
option seeming
However, the 7-Eleven option provided little more than im
mediate (and possibly temporary) placement on a lot of store
shelves.

Through many communications and meetings during the

summer of 1997, several issues were discussed and resolved.
For 7-Eleven would a six-month exclu
example, require only
sive right to Ben & Jerry's, and even that would be only for
the specific flavors being sold to 7-Eleven. Because of its rel
atively small size and inability to cover a loss, Ben & Jerry's
was asking for sale terms that would transfer title (and all
risk) for the product at the plant gate. It also was asking for 12
weeks lead time on any order to allow for sourcing of ingre
dients as well as efficient production scheduling and ship
ping. It appeared that these requests would not be too
burdensome for 7-Eleven. The sensitive issue of price was in

tentionally left until late in the discussions. H?agen-Dazs

was being sold for 250 yen per 120-milliliter cup, and 7
Eleven wanted to position Ben & Jerry's at a slightly lower
price point. This was problematic for Odak, who had been
working to position the product as equal or superior in qual
ity to H?agen-Dazs.

The retailer thought it could sell at least six cups per day
at each store, which would be the minimum to justify contin
uing to stock Ben & Jerry's. Looking at the size of 7-Eleven's
ice cream freezer cases suggested that this would require that
approximately 10% of 7-Eleven's cup ice cream sales be of
Ben & Jerry's Ben & Jerry's was as yet unknown in
products.
Japan, and it did not have the budget for a marketing cam
paign there. Sales would have to rely primarily on promo
tional efforts by 7-Eleven, but the company was making no
specific commitment to such efforts.

It would be a evening meal as Odak, Pezzani, Bowman,

long
and Hight gave their final thoughts to the decision before
them. Not only had Odak promised Iida that he could make a
decision, but Yamada needed an answer to his proposal as
well. In any event, Ben & Jerry's needed to proceed with one

plan or another if itwas going to have any Japanese sales in

its 1998 income statement.

Educator Insights: Ben & Jerry's?Japan 109

 By now, the student should understand that several issues
Educators' Note: were discussed and provisionally worked out between 7
Building Trust Eleven and Ben & Jerry's during the summer. This process of
working together also let the two sides become comfortable
with each other so that by the end of the summer they could
feel enough mutual trust to consider entering into an agree
ment with the other. All contracts are and 7
The Author incomplete,
Eleven would have to rely on Ben & Jerry's to (among other
James M. Hagen is assistant things) cooperate logistically and get the product produced
and on time. Ben & Jerry's would have to rely on 7
professor of business manage shipped
ment at Cornell University. Eleven to not pull the product after the first shipment. In ad
dition, 7-Eleven had not committed to any promotion except
minimal point-of-purchase displays. Ben & Jerry's specific
promotion commitment was for nothing more than a visit
by
ACKNOWLEDGMENTS Cohen or Greenfield sometime during the promotion.
The author gratefully acknowledges
research assistance from Jose Gobbee Odak noted that itwas important that the two sides avoid the
and the generous contribution potentially divisive topic of price and margin/splitting until
of Perry Odak, chief executive the end of negotiations, when they had already become fa
officer of Ben & Jerry's, for his time miliar with each other. Throughout the summer discussions,
and that of company staff members. there were opportunities for each side to show faith in the
Some of the names in the case have other, another trust-building exercise. In late summer, Odak
been changed for purposes of told 7-Eleven he had ordered the $2 million of special pack
privacy. The full case (with optional ing machinery in anticipation of working out a deal in time
teaching notes) on which this article for the 1998 season. Such opportunities were lacking in dis
is based is available as Ben & cussions with Yamada, though in the Yamada case, trust

Jerry's?Japan (case #9A99A037) would be even more important. Giving up control of a brand
from Ivey Publishing at the Richard for a potentially huge market would perhaps be even more
Ivey School of Business, difficult for Ben & Jerry's than formany other consumer food
University of Western Ontario manufacturers. The brand embodied many unique qualities
(e-mail: cases@ivey.uwo.ca). (caring, social mission, fun, funkiness, and even Cohen and
Greenfield themselves) that would be difficult for a licensee
to maintain and build on.

1. A brief explanation of the relationship between the Japan

Notes ese 7-Eleven organization and the U.S. 7-Eleven organiza
tion is in order. The convenience stores originated in
Texas in 1927 as a retail concept of Southland Corpora
tion, which had been in the ice business. Southland began
using the 7-Eleven banner in the 1950s, because the stores
would be open from 7 a.m. to 11 p.m. The business grew
through company-owned and franchised stores. South
land gave a master franchise for Japan to the Ito Yokado
a operator there, which in
Company, large supermarket
turn established 7-Eleven Japan to conduct the 7-Eleven
business in Japan through company-owned and fran
chised stores. In the 1980s, Southland was in financial
distress, and Ito Yokado, along with its subsidiary, 7
Eleven Japan, bailed out Southland, acquiring a control
ling interest in the company. In this light, Odak's dinner
with Iida in Japan constituted a sort of executive summit
between Ben & Jerry's and its largest customer.

110 James M. Hagen