UK: Tutti-frutti capitalists.

UK: Tutti-frutti capitalists. - It's difficult to make money and hold onto ethical values, admit Ben & Jerry. Difficult, but not impossible.

by Rhymer Rigby.
Last Updated: 31 Aug 2010

It's difficult to make money and hold onto ethical values, admit Ben & Jerry. Difficult, but not impossible.

'Make sure you notice that I have new laces in my shoes. I use 39-inch laces - slightly longer than is recommended for five eyelet shoes.' And the reason for these marginally over-long laces? 'Well ...' explains the chairman, apparently deep in thought, 'I like a slightly longer lace.' He smiles before adding, 'You should also notice my tie-dyed socks,' as he lifts a trouser leg.

I am talking to a 'couple of guys' - as they refer to themselves - who are chairman and vice chairman of a NASDAQ-listed business capitalised at $110 million, which boasts 150 outlets and employs some 700 people.

But, if you passed these two in the street, with their sloppy T-shirts, portly figures and worn jeans you'd probably think they were a couple of Grateful Dead roadies. They are, in fact, Ben Cohen and Jerry Greenfield.

You probably know them better as Ben & Jerry, makers of what the marketing men refer to as 'super-premium' ice cream.

Premium ice cream, the aristocratic cousin of our more familiar vegetable oil-based confections, only really came to national notice with the arrival of Haagen-Dazs, which used sophistication and sexual imagery (remember the beautiful people improbably managing to combine their lovemaking with frozen desserts) to sell its product. Ben & Jerry (which commands around 39% of the American marketplace, as opposed to Haagen-Dazs' 43%) takes a rather different tack, marketing its eponymous wares with a combination of down-home hippie folksiness (flavours include 'Chunky Monkey' and 'Cherry Garcia') and 'right-on' credibility ('Rainforest Crunch').

Indeed, Ben & Jerry's Homemade Inc makes much of its reputation as an ethical business. Like The Body Shop the company doesn't just pay lip service to social and environmental concerns. It carries out environmental-impact reports on almost everything it does, sources its ingredients with near-obsessive care and donates a whopping 7.5% of its profits to charity.

The pair also write books, their latest is (unsurprisingly) subtitled 'how to lead with your values and make money, too'.

But, as the company is discovering, having two bottom lines to work to is not easy. Ethically imbued companies attract huge public and media interest, especially if the news is bad. The instant Ben & Jerry Homemade Inc posts a poor set of results, critics carp about the money wasted on righteousness and even the smallest splotch on the company's ethical reputation will be blown out of all proportion. Ben is laid back about the criticism: 'It's difficult, but it's difficult to do anything really well ... it's difficult to be well managed and have a values-led business - but it's not impossible.'

Invariably, this commitment to doing 'the right thing' throws up all manner of dilemmas. For example, when looking at where to site a new factory in 1992 the company was torn between building a new factory in its native Vermont, where it could support struggling family-run farms, or building a new factory closer to the west coast market, thereby avoiding the pollution caused and energy expended by transporting the ice-cream a couple of thousand miles. Eventually Vermont won the day 'because the dairy farmers were having such a tough time'.

Their Vermont upbringing is a major influence on Ben and Jerry, as is their long friendship. They started churning their ice-cream some 20 years ago, but had met in seventh grade, where they were, by their own admission, the 'two slowest kids round the track'. After school, Ben was a struggling potter (easy to imagine) while Jerry was failing to get into medical school.

Staring a life of mediocrity full in the face, they decided to try something a little different, 'something we might be able to succeed at - and we'd always been interested in food'.

This was back in the late 1970s, before there was a wood-roasted organic guinea fowl in every pot, and the hip edibles were bagels and quality ice cream. As they couldn't afford the requisite equipment for bagel making, they plumped for ice cream, took a $5 correspondence course in making it and, with a $12,000 loan, opened their first parlour in a renovated petrol station in Burlington, Vermont. The business grew apace, and went public in 1984, with stock being offered initially to Vermont residents only, in order to encourage small, like-minded shareholders. It then fought off a takeover bid from Pillsbury, the American food giant. Ben & Jerry's responded to the predatory behaviour of Pillsbury by pillorying its mascot, the Pillsbury Doughboy. The company signed up to NASDAQ in 1985 and now has outlets in the US, Canada, Israel and Holland. In terms of frozen treats, Britain remains something of a backwater, despite the much-hyped launch of its 'Cool Britannia' flavour. Indeed there have been a few setbacks along the way. For example, Sainsbury's, which used to stock eight of the company's flavours, has cut back to four, citing inadequate marketing by the company.

Ben is now non-executive chairman while Jerry is non-executive vice-chairman.

They no longer concern themselves with the day-to-day running of the company but work on developing new flavours (cheesecake and chocolate-coated lace pecan are in the pipeline) and promoting the business - which they do very well. The duo relinquished executive control a little over three years ago 'because the company ... needed a greater breadth of management experience than we had'.

Finding an executive willing and able to pursue their double bottom line of values and profits has not been easy. First they bought in Bob Holland, an ex-McKinsey man, who must have found it very strange coming from McKinsey's rarefied self-importance, to a position where 'joy gangs' dressed in Elvis garb cruised the shop floor to cheer up the workforce. Holland only lasted about two years: 'We bought him in when the issues facing the company were largely operational - we had a plant which we were in the middle of building that was way over budget - Bob did a really good job.' But two years down the line, they say, the issues facing the company required consumer experience.

After Holland left - on very good terms, they insist, despite media speculation to the contrary - they bought in Perry Odak. Odak had a somewhat difficult pedigree. His last employer went by the self-explanatory name of US Repeating Arms, while Ben and Jerry are well known as staunch advocates of gun control.

How much of a dilemma did this present? 'I think the media enjoyed picking up on what they thought was a really ironic situation', says Jerry, 'We talked to Perry quite a bit about it because we are serious about social values.' The two square this one with their consciences by arguing that Odak is an avid hunter and hadn't worked 'on any military things'.

For all the obvious ethical correctness of the founders, the company is a public concern and is subject to the demands of shareholders who are not, you might think, as principled. As one analyst sees it, the company should spend more time on 'selling its Rainforest Crunch than saving it'. Another points out that, while Ben & Jerry's is a lovely story, the performance of its shares has been very average indeed. Fortunately, Ben & Jerry's is still largely owned by small shareholders from Vermont rather than institutions. According to Jerry, the AGMs are incredibly well attended by the locals in a carnival-type atmosphere.

The shareholders who do ask questions, he says, ask the board why it isn't being more progressive and radical.

Ben and Jerry still wield considerable control over their company. There are two different classes of stock, one of which has 10 times the voting power of the other. As Jerry says, 'I think we own about 40% of the voting shares although much less economically. Still, assuming we don't screw up totally, I think we have good control of the company.' Control maybe, but the presence of Odak makes one ask whether Ben & Jerry's Homemade Inc, in spite of the its high ideals and those of its army of small shareholders, is slowly turning into 'just another company'. The business has grown beyond what its founders had originally envisaged and found that, while it's nice to be big, being nice and being big do not necessarily go together.

The company is clearly at something of a crossroads. Those who look hard enough for faults with Ben & Jerry will certainly find them. That its lofty ambitions are not always matched by its actions is perhaps not the point, though. The chubby twosome will cheerfully admit that, in any number of areas, they have quite some way to go. The point is that the company and its eponymous founders are at least still in a position where they can try to strike some kind of balance between simply making money and a desire to behave in a 'right-on' way.

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