The ‘suit’

How the co-founder of Ben & Jerry’s Ice Cream refocused the definition of business solely from profits to the social good.

By ARTHUR WOLAK
Ben Cohen 521 (photo credit: ARTHUR WOLAK)
Ben Cohen 521
(photo credit: ARTHUR WOLAK)
In the late 1970s, after Ben Cohen and his business partner Jerry Greenfield completed a $5 correspondence course on making ice cream, the two turned their single ice cream shop – established in Burlington, Vermont, where cold and snowy winters are legendary – into a $300-million business empire under the banner name of Ben & Jerry’s.
I met Cohen when he visited Vancouver in March to address community business leaders at the Jewish Family Service Agency’s major annual fund-raiser – its Innovators’ Lunch. Cohen had much to say about his company’s growth and his philosophy of business, which, he argues, encompasses a spiritual element that should not be ignored by the business world.
“There is a spiritual aspect to business, just as there is to the lives of individuals,” Cohen maintains. “As you give, you receive. As you help others, you’re helped in return.”
Though his views have yet to be widely embraced by big business, Cohen’s philosophy evolved as his company grew. And it wasn’t cultivated in academia.
As Cohen lacked scholarly ambition, his father and sister first took the initiative by filling out his college applications. He subsequently attended Colgate, Skidmore, NYU, and the New School. He dropped out of all of them.
He then got accepted into an innovative, unstructured program at the University of Massachusetts at Amherst called the “University Without Walls.”
“There were no classes; there was no campus; there were no teachers. The idea was that the whole world was your campus, and you go out there and you learn whatever you want to learn from whomever you want to learn it from, come back to this administrative body and prove that you learned it, and they give you a degree,” he explains.
Yet Cohen dropped out of this program, too.
While neither structured nor unstructured learning proved to be Cohen’s strong point, he had other talents, and business was one of them. Together with Greenfield, a friend since childhood, Cohen entered the food business, choosing ice cream as the vehicle to their prosperity.
Though they had a product, they initially lacked a location.
“We figured if it was going to be ice cream, it should be a warm, rural college town,” notes Cohen, but their analysis revealed that competition had already beaten them to the hot spots. “So we decided to throw out the criterion of warm and ended up in Burlington, Vermont.”
Financing concerns came next. Banks were not excited about advancing funds to two newcomers who lacked business experience, stability, collateral and credit histories.
“We realized the only way we were going to get this loan from the bank was to get it guaranteed by the Small Business Administration,” he recalls.
But they needed a business plan that neither knew how to prepare. They sought advice from a friend, who offered a template for a pizza parlor that sold its wares by the slice. They simply plugged in “ice cream cone” wherever a pizza slice was mentioned.
Their application was accepted; the terms were not. Still, they managed to borrow a few thousand dollars from the bank, forming the seed money of their initial operation, which began in 1978.
THEY BROKE even in their first year, but by the second, cold northeastern winters proved a major obstacle to sales. Cohen decided to expand by selling ice cream wholesale to restaurants in 2.5-gallon tubs, a venture that succeeded.
By the third year, however, operating costs nearly shut down their enterprise.
“We were going to go out of business,” says Cohen. “We were at the very end of our rope and losing money, losing our shirts, and finally, in a last-ditch effort to survive, we decided to pack our ice cream in pint containers.”
They sold pints to small “mom and pop” groceries, a strategy that completely revolutionized their business.
“From 50 accounts, we went to 250 accounts in a few months,” Cohen says.
From small-store success, Vermont supermarkets followed. They were able to sell their product to independent ice cream distributors in nearby New Hampshire, Maine and New York. However, things finally took off when they entered their first major market: Boston.
To do so, they had to advertise for the first time, but all they could afford was a 10-second slot on late-night TV.
The ad featured “Jerry and myself in the middle of this oversized pint container, and we said ‘Hi! I’m Ben, I’m Jerry. We may not have the money for a 30-second TV ad, but we sure do make some of the best ice cream you ever tasted.’ And that was it. It worked.”
Ice cream sold in Boston and business grew, until their distributor there told them that Häagen-Dazs, now owned by Pillsbury, was the stronger player in the market and he was therefore dropping Ben & Jerry’s in favor of the competition. They quickly launched a campaign of printed aerial banners that flew around major Boston sports stadiums, and they rented signs on transit buses featuring two pudgy white hands squeezing a pint of Ben & Jerry’s ice cream. “Don’t let Pillsbury’s dollars strangle Ben & Jerry’s ice cream. What’s the Doughboy afraid of?” the signs read.
Their chutzpa proved effective.
“Pillsbury was getting such a black eye from their tactics of trying to keep us out of distribution that they relented and allowed us to continue to keep distributing our ice cream,” Cohen says.
With annual sales now at $3 million, the two suddenly realized they were no longer “ice cream men,” but businessmen.
“We were no longer spending our time making ice cream and scooping ice cream to customers... we were taking up our time with hiring and firing and dealing with accountants and lawyers, and doing the books, and we felt like we were becoming just another part of the economic machine that tends to oppress a lot of people,” laments Cohen.
THEY CAME close to selling the business, but a friend told Cohen, “If there’s something you don’t like about business, why don’t you just change the way you do it?” For Cohen, this advice was an epiphany. They made a conscious decision to keep the company.
“Our business was bursting at the seams,” Cohen says. “We were at the stage in a business’s life when it needs some cash infusion in order to move to the next level, and for us, the next level was to build a real icecream plant.”
Venture capitalists wanted desperately to invest.
“Instead, we decided to use this need for cash as an opportunity to make the community the owners of our business,” Cohen recalls. It was an unusual move.
“As the business grew, the community would automatically prosper because it wouldn’t be beholden to the generosity of our business, but it would be owners,” notes Cohen.
They achieved this aim by holding the first in-state Vermont public stock offering ever. Against the advice of accountants and lawyers, “we sold stock in Ben & Jerry’s to our neighbors, Vermonters, people who had supported us from the very beginning,” Cohen proudly relates.
They offered a very low minimum buy-in of $128.
Selling out this initial public offering, 1 percent of Vermont families became owners of Ben & Jerry’s.
As business grew, they needed more funds. Now they decided to pursue a national public stock offering. At this point, Cohen explains, “we decided to formalize the Ben & Jerry’s Foundation and formalize a commitment and put in the offering prospectus that the foundation would be getting 7.5% of our pre-tax profits.
That’s the highest amount of any publicly held company that gives to charity.”
BEFORE LONG, the foundation was overwhelmed.
“We got so many requests for so many incredibly worthwhile organizations dealing with issues of hunger, poverty, education, domestic abuse, that we could only fund about 5% of the applications that were coming in to us.”
They quickly realized that this situation was common to most foundations in the US and throughout the world.
“There are so many unmet needs that even all of the foundations put together can only take care of a small percentage of them,” notes Cohen.
They began to think about other ways their business could help, reexamining the very definition of business.
The usual definition, Cohen suggests, is “an entity that produces a product or provides a service.” At Ben & Jerry’s, they decided that “business is the combination of organized human energy, plus money, which equals power.”
This power, Cohen believes, has led business to transcend religion and government as the strongest force in society.
“As that most powerful force, business controls our society,” Cohen maintains, “and all of that is done in the narrow self-interest of business without regard for the effect that it has on the society as a whole. That’s the big difference between those other two formerly most powerful forces, religion and government.
Because at least religion and government had as their purpose to improve the quality of life for society, but business has never had that as part of its brief.”
Attending a weekend workshop for CEOs at Atlanta’s Emory University, Cohen and Greenfield met the heads of some of America’s largest businesses, including United Parcel Service and Home Depot.
“We discovered that the people who run these huge corporations are good guys and they have social concerns, and they give freely of their time and their money privately in terms of donations,” says Cohen.
But they left with a question: “If business is the most powerful force in the world, and the people that are running these huge corporations have social concerns, how come those businesses aren’t really doing their bit to improve the quality of life in society?” Cohen believes there are two reasons.
The first has to do with how compartmentalized people’s lives have become. Social concerns in contemporary Western societies are dealt with by donations of money and time to social nonprofit organizations; spiritual concerns are addressed at synagogues, churches and mosques; financial concerns are tackled in the business world. However, Cohen firmly believes that “we will only achieve the spiritual concerns that we talk about if we are to integrate those spiritual concerns when we as human beings are at our most powerful, when we are organized in a business with the resources to actually do something.”
The other reason, according to Cohen, is connected to how success is determined.
“We measure success in business by profit, how much money is left over at the end of the month or at the end of the year. And you only get what you measure... and therefore, we keep our eyes away from the effects that we can have in terms of benefiting the community and the social benefit,” he says.
Ben & Jerry’s decided to solve this problem by changing that model. Employees were advised that Ben & Jerry’s would now be measuring success through a “two-part bottom line” – by how much the company helped to improve quality of life in the community, and how much money it made. The staff loved the idea.
Later, however, “our managers came back to us and said, ‘That stuff about the two-part bottom line sounded really good, but we find when we devote company energy and resources to improving the quality of life in the community, that takes away from improving profits, and vice versa,’” Cohen recalls.
He and Greenfield were stunned.
“It occurred to us that the solution to the dilemma was to choose those courses of action that have a positive effect on both parts of the bottom line,” he says.
Recognizing that money was a means, not an end, their major focus became values combined with social purpose. “We decided to work to integrate social concerns across our business.”
Cohen and Greenfield acted on their words. The company bought coffee from a Mexican cooperative, improving Mexican coffee farmers’ quality of life. It bought blueberries from a Native American tribe. When the rain forest emerged as a major ecological issue, Ben & Jerry’s developed a flavor, “Rainforest Crunch,” designed around products that could be cultivated in the rain forest so it became economically viable.
The company purchases $3 million worth of brownies annually from Yonkers-based Greyston Bakery, which provides employment opportunities for those in need. Ben & Jerry’s recently committed to making all of its ingredients Fair-Trade certified by the end of 2013.
But selling ice cream is fundamental to Ben & Jerry’s business success, and these days it’s achieved largely through franchisees. Ben & Jerry’s operates in many parts of the world, including Israel. In fact, Israel is one of the few places outside the US that Ben & Jerry’s manufactures its ice cream (it’s also made in Canada and the Netherlands).
In addition to franchisees, there are “partner shops” owned by nonprofit social service agencies. “The people that the social service agencies work with – mostly at-risk youth – get job training in those shops and the profits go back to those agencies,” says Cohen.
Ben & Jerry’s has also bought low-income-housing tax credits and established a relationship with the South Shore Bank, a development bank set up to greenline what other banks were redlining. The company has used its packaging to discuss topics like the Cold War and shifting money from nuclear weapons into education.
In the face of some media criticism that Ben & Jerry’s was cynically manipulating customers to purchase ice cream by doing good deeds, the company replied that “our actions are based on deeply held values, that it’s an integrated and holistic effort to meet another set of our customers’ needs – the need to solve the social problems of our day – and that it provides added value. It’s a unique selling proposition. It motivates our employees. It helps with recruiting and it builds tremendous consumer loyalty that’s based on shared values,” says Cohen.
“When business speaks, the public listens, the media listen, politicians listen,” he maintains – and as such, he feels, it’s time for both business and businesspeople to start taking responsibility not just for their own interests, but also for the common good.
“As your business supports the community, the community supports your business,” says Cohen. “We are all interconnected, and as we help others, we cannot avoid helping ourselves.”