Ben and Jerry's Expansion into Russia
Issues with Expanding Ben & Jerry's into Russia
Ben & Jerry's Homemade, Inc., the Vermont-based manufacturer of ice cream, frozen yogurt and sorbet, was founded in 1978 by Ben Cohen and Jerry Greenfield. Their first shop was in a renovated gas station in Burlington, Vermont, with a $12,000 investment ($4,000 of which was borrowed). Within a short time, they became popular for their innovative flavors, made from fresh Vermont milk and cream. The main products of Ben & Jerry’s are ice cream, low fat ice cream, frozen yogurt, sorbet and novelty products and are produced in pints, quarts, and 2.5-gallon tubs. Their products are distributed nationwide as well as in selected foreign countries in supermarkets, grocery stores, convenience stores, franchised Ben & Jerry's scoop shops, restaurants and other venues.
Ben & Jerry's franchises scoop shops in both the U.S. and Canada. The company also has wholly-owned operations in France, Japan and the United Kingdom, and licensees in the Benelux countries, Israel, Canada, Peru and Lebanon. In 1999, Ben & Jerry's employed 814 people worldwide, primarily covering only the manufacturing, central and distribution facilities in Vermont.
Economy Overview in Russia:
After the implosion of the Soviet Union in 1991, Russia was struggling to establish a modern market economy and achieve strong economic growth. Russia heavily depended on exports of commodities, particularly oil, natural gas, metals, and timber, which accounted for over 80% of exports. Russia's agricultural sector beset by uncertainty over land ownership rights, which had discouraged needed investment and restructuring. Another threat was negative demographic trends, fueled by low birth rates and a deteriorating health situation - including an alarming rise in AIDS cases. Russia's industrial base was dilapidated. Other problems included widespread corruption, capital flight, and brain drain.
Ice Cream Industry in Russia:
Russia has always been known for its tasty ice cream—eaten all year-round. Ice cream is one of the few quality food products and so popular that is available even when supermarket shelves were otherwise bare. Russians in Moscow consume 170 tons of ice cream per year, 98 percent of which is Vanilla. Since Russia was the third largest market in the world in the late 1980’s, the ice cream business represented enormous potential.
While one can still purchase the Soviet-era standard, the vanilla waffle cone, now Russians can choose from a dizzying array of flavors and ice-cream products. The Russian ice cream industry has also become...