The following is an excerpt from Ice Cream Social – The Struggle for the Soul of Ben & Jerry’s, reprinted with permission. Author Brad Edmondson is also making daily posts of material related to the book, including more excerpts at www.icecreamsocialbook.com. He welcomes your comments and stories here and at that website.
By Brad Edmondson
Social Stirrings - Ben & Jerry’s got serious about its “ice cream for the people” philosophy on April 26, 1984, the day the company made its first stock offering. That is when they really started sharing the company’s wealth with the communities that supported it. That was the day the company went public—but only Vermont residents could buy the stock. Co-founder Ben Cohen said the sale allowed Ben & Jerry’s to give its best customers a piece of the action.
The company needed to raise $750,000 in equity to finance a $3.25 million ice cream plant in Waterbury, about 10 miles east of Burlington, Vt. Business was booming, and the prospects for expansion were bright. Or so the founders thought. Then Ben and Jeff Furman, a long-time board member whose co-workers often describe as “the ampersand in Ben & Jerry’s,” tried to get a loan. Jeff remembers applying to dozens of banks before they found one that would even consider lending money to anyone who looked and acted like they did. And the bank officer added that he needed to see some equity first.
Ben came up with the idea to restrict the stock offer to people who lived in Vermont, with a minimum purchase of 12 shares at $10.50 apiece. Nearly everyone who heard the idea said that it was naïve and impractical. They told Ben that the stock offer could not reach its goal under those restrictions. But Jeff and Chico Lager – general manager, president and CEO from 1981 through 1990 – finally agreed to the plan because Ben would not back down. The fundraising deadline was upon them. They needed to stop arguing and do something. Ben set the course, and they followed it.
The in-state stock offering was a classic Ben move, an idea that seemed crazy and exasperated his colleagues but then succeeded brilliantly. Chico and Ben made their pitches in rented conference rooms around the state. They sealed the deal by handing out free samples of ice cream after they finished talking. They easily raised the money, and that was just the beginning. The offer also generated a tremendous amount of publicity and good will. By the time it was done, nearly 1 percent of the households in the state owned shares of Ben & Jerry’s.
Restricting the offer to one state also made it unnecessary to register it with the Securities and Exchange Commission, which reduced banking costs. Giving ownership to a large number of people, each of whom held a small number of shares, meant that Ben could get the money he needed while retaining firm control of the company. And the sale went far beyond the standard business practice of making small donations to community organizations. It was more like a merger with thousands of patriotic Vermonters who would hassle the corner grocer if he ever ran out of Heath Bar Crunch. It was the first time the company found a big way to make its financial, social and quality objectives move forward together.
Creative thinking and flexibility saved Ben & Jerry’s more than once in those days. It came in especially handy when the company faced strong-arm tactics from Pillsbury, its chief competitor. Pillsbury, which spends millions on ads featuring a character called the Doughboy, owned Häagen-Dazs, the first super-premium ice cream in the United States. When Ben & Jerry’s started selling in Boston, Pillsbury told its distributors there that they wouldn’t get any Häagen-Dazs unless they agreed not to deliver Ben & Jerry’s.
Pillsbury’s move was blatantly illegal, but Ben and Chico didn’t have enough time or money to rely on the courts. So they came up with a dual strategy. First, they sent Jeff out to interview lawyers. Jeff found one he liked at Ropes & Gray, an elite corporate firm based in Boston. “As I was talking to Howie, he leaned back and put his feet up on his desk,” Jeff said, “He had a hole in the sole of his shoe. That sold me.”
Howard Fuguet specialized in antitrust law because he liked working with entrepreneurs. “I had done quite a bit of work representing underdogs,” he said. “I was intrigued by Ben & Jerry’s, and I thought that we could win this.” Howie became the company’s lawyer, an important advisor to the board of directors, and, as the years went by, a storehouse of institutional memory.
Ben and Chico also crafted a non-legal strategy, in line with their philosophy of cultivating direct, personal relationships with customers. They put notices on their pints inviting customers to join a campaign called “What’s the Doughboy Afraid Of?” They mailed out packets with bumper stickers and form letters customers could send to Pillsbury’s CEO. They also flew Jerry to Minneapolis to stand in front of Pillsbury’s headquarters with a picket sign. “I was very much in favor of this,” Howie said. “I could see the marketing value of the lawsuit. I might have asked them to tone down a couple of their slogans, but it was a very interesting project.”
Jerry always gets a laugh when he tells the Doughboy story in speeches now, mostly because he portrays himself as hapless and nutty. “Nobody had any idea of why I was there,” he said at a talk at Cornell University in 2013. But that isn’t quite true. Ben and Chico made sure that a photographer for the Minneapolis Star Tribune was there. The Associated Press picked up the story, and it ran all over the country.
The Doughboy campaign generated an avalanche of positive publicity for Ben & Jerry’s, and it put so much pressure on Pillsbury that the big company was forced to back off. It also set a pattern the company would use, with spectacular results, for decades. Instead of doing traditional advertising or marketing campaigns, Ben & Jerry’s would take their product directly to people. It would market to taste buds through sampling, and also to an ordinary person’s sense of fairness and justice by taking on social issues.
Ben & Jerry’s commitment to linked prosperity deepened a year later when Jeff and Howie led the company through a national stock offering. Again, the company went directly to its customers first. It put a notice on each pint that encouraged customers to “Scoop Up Our Stock,” with a toll-free number to call for a prospectus. “It was an unusual move,” said Howie, “but once the Securities and Exchange Commission people understood it, they just laughed and said, ‘Why not?’ We kept trying to come up with things for Ben & Jerry’s that were a little novel. I regarded it as a challenge, and they encouraged me.”
As Ben, Chico and Jeff worked on the prospectus for the national stock offering, they realized that they needed to tell potential investors exactly how much of their money the company planned to give away. Ben had been giving larger and larger cash contributions to local groups, while Chico had been trying to keep the giving at around 5 percent of pretax profits. So they created the Ben & Jerry’s Foundation, an independent nonprofit organization funded by the company. Its goal was to support projects that were unlikely to be funded through traditional sources. The projects they were looking for would be models for social change, ideas that enhanced people’s quality of life and community celebrations. Jerry agreed to be the foundation’s president. Jeff was the second board member, and Naomi Tannen, who had owned Highland Community, the school where Ben had met Jeff, was the third.
Ben endowed the foundation with 50,000 shares of his stock, which was a little less than one-tenth of his equity in the company. He wanted to set the company’s annual contribution to the foundation at 10 percent of pretax profits, or double the percentage that Chico had tried to maintain. Chico replied that giving this much away would make it impossible to fund future expansions without more stock offerings, which would further dilute Ben’s ownership. The underwriters added that investors wouldn’t buy into a company if it gave away so much cash, because that would reduce dividends. After a lengthy argument, Ben compromised on 7.5 percent of pretax profits, or nearly four times the national average.
Jerry Greenfield image: David Brewster
Book cover: Ice Cream Social – The Struggle for the Soul of Ben & Jerry’s by Brad Edmonson
Brad Edmondson is an award-winning journalist and business consultant who helps his clients understand and benefit from social change. His writing appears regularly in national magazines, including AARP and The American Scholar. To learn more visit http://www.icecreamsocialbook.com%%IgnoredCommentPreserver_7029f9f0b062034458f4ddbfc2ea8394_1%%