Extensive Case Study - Halo Top Ice Cream Behavioral Economics

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HALO TOP ICE CREAM & BEHAVIORAL ECONOMICS

Original written by professor Marta Albors at IE Business School.
Original version, June 17, 2019. Last revised, November 25, 2019 (L.R.).
Published by IE Business Publishing, María de Molina 13, 28006 – Madrid, Spain.
©2019 IE. Total or partial publication of this document without the express, written consent of IE is prohibited.
SECTION 1: A NEW YEAR’S DILEMMA
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It’s December 31, 2011. You are at a New Year’s Eve party of a friend in Manhattan when someone
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introduces you to Justin, a 32-year-old corporate lawyer at a white-shoe firm 1 from California, who is
visiting NYC for the holidays. An amateur standup comic in his free time, he is funny and engaging,
despite describing himself as an introvert. He projects a warm quality that makes him instantly
connect with people.
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For a while, you talk about this and that – your hometown and his, each other’s last big trips (his to
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Hong Kong for work, yours to Sydney for fun), a movie you both have seen and enjoyed. He tells you
about studying Law at Columbia and you tell him about the amazing Psychology and Behavioral
Economics course you are about to finish. Just then, hearing about your newly acquired expertise,
Justin asks if he could maybe pick your brain for some advice on an idea that he has been toying
with lately and of course, you agree.
Living in California, he jumped into the fitness and health trend a while ago, constantly tweaking his
diet to ensure good energy levels and, why not, a good beach body as well. After much trial and
error, he has found out that the best thing for him is to boost protein and avoid sugars as much as
possible; however, his sweet tooth tends to get the best of him, and when he manages to control
himself, going without dessert is killing him. Therefore, for the past year and a half, he has been
experimenting at home, trying to create a dessert that is good and tasty but low on sugar, fat and
calories – something sweet that doesn’t leave him sluggish afterwards.
Although he started with frozen yogurt, he soon bought himself a $100 Cuisinart home ice cream
maker through Amazon and started creating concoctions with different ingredients. Lately, he claims,
he has gotten the formula down right, thanks to the use of two natural ingredients: stevia (a low-
calorie, plant-based sweetener) and erythritol (a no-calorie sugar alcohol). He believes he has
managed to create a scrumptious high-protein ice cream with one-third of the calories that leading
US brands like Häagen-Dazs and Ben & Jerry’s have. It is not perfect, as it has a slightly weird texture
and needs to be unfrozen for around 30 minutes to reach the perfect consistency (if not, it can appear
too hard and chalky, he admits). However, he has tested it in a focus group with 16 very honest
friends and 14 of them asserted that his ice cream tastes extremely good.
He has contacted several local manufacturers to produce and commercialize it but so far, nobody
has expressed any interest in doing so. Thus, he is considering the idea of launching this ice cream
in the market himself, using the market standard pint-size and maintaining, as his product claims,
that you can eat a whole pint in one go and remain fit and healthy. “If I need it, other people will surely
need it”, he tells you.
1
In the US, the term “white shoe” is used for the most prestigious firms in professions such as law, investment banking and
management consulting. They typically have well established companies as clients and have been in practice for a long
time.
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HALO TOP ICE CREAM & BEHAVIORAL ECONOMICS AH1-003-I
To launch his own ice cream brand, however, he would have to work on the project full time and,
consequently, leave his $235,000-a-year job as a lawyer. That could be problematic, as he still owes
around $350,000 in student loans.
What would be your advice to Justin? Would you tell him to quit his job as a lawyer and
pursue his ice-cream idea?

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SECTION 2: AN UNEXPECTED PACKAGE
Of course, at that New Year’s Eve party a couple of months ago, you simply told Justin that you were
not equipped to give him any advice. You had just attended your course on Psychology and
Behavioral Economics and knew that Justin would need more than a good or even excellent product
in order to make a decision – he needed to go further and find detailed information about the market,
the environment, the competitors, and the consumers. Only if he had that kind of data would he be
able to make a proper decision, and that’s exactly what you said to him before getting your coat to
leave.
Now, in the first week of March, with the sun emerging from behind the clouds for the first time in
ages and a faint smell of spring floating in the air, you have completely forgotten all about Justin and
his curious ice-cream endeavor. That is why, when you arrive home after work, internally debating
whether to order pizza or Indian take-out, you are quite surprised to find a hefty package in your
mailbox and even more baffled when you read the sender’s details. It takes you a while to recall the
nice lawyer at the party, but then you also remember that you exchanged contact details and he
promised to follow up on your chat. Wow, that was a first! Nobody ever follows up on party talk. Justin

has definitely impressed you.

You open the package before even crossing the entrance to your house and find that Justin has
indeed sent you a lot of the data you had mentioned back at the party. Since he has taken the time
to do the research and mail it to you, it is only fair, you think, to look at the data as soon as possible
and give him a response.
THE ICE CREAM MARKET IN THE UNITED STATES IN 2011
MARKET AND COMPETITORS OVERVIEW
The ice cream and frozen-dessert market is the biggest of the frozen food markets in the US, with
88% of the US population claiming to eat ice cream or sherbet regularly 2 in 2011. Sales that year
amounted to $US 7.6 billion 3, growing slightly (2.7%) vs. 2010 but still well below their highest point
of 2007 (where they reached 9 billion $US). The decline was due to a slow but steady decrease in
per capita consumption (13.2 pounds per-capita in 2011, down from 16 at the beginning of the
millennium). The overall market shows, as well, a significant seasonality, with around 70% of national
sales taking place from the beginning of April to the end of September, with June, July and August
as the peak months 4.
Commonly, the market is divided into two big segments of similar size: foodservice (those ice creams
that are sold in restaurants, bars, hotels, etc.) and retail (those sold in stores). Retail, in turn, is
divided into three sub-segments: impulse, take-home and artisanal (see Annex 1).
In 2011, the impulse segment, comprised of those ice creams that are bought for immediate
consumption, remained the largest one (42% of the market share) but had decreased 2 pp vs the
previous year, influenced by the economic recession that started in 2008. The main drivers of this
segment are consumer indulgence, small portions and wide assortment 5 as well as ubiquity (brands
need to have a capillary distribution network. with presence everywhere, to be available for
consumers whenever they feel the impulse). For this segment, the key distribution channels are ice
creameries (27% of volume sold), convenience and high-frequency stores (25%) along with
supermarkets (16%) 6. Except for supermarkets, these tend to be family-owned and local, and with a
need for very high-margin products (above 30%) to survive and earn a profit 7.
2
Simmons Research LLC; Statista; US Census Bureau; ID 276929
3
US Census Bureau; ID 186099 via Statista.com
4
Federal Reserve Bank of St. Louis: https://fred.stlouisfed.org/series/IPN31152N
5
Source: Technavio, via marketwatch.com
6
Numbers have been estimated for the case purpose.
7
Entrepeneur magazine: “Franchising trends. The Scoop on premium ice-cream franchises” (Jan, 2004).
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The take-home segment is slightly smaller than impulse (36% of market share) in 2011 but seems
to be steadily growing over the past two years, as the flip side of the economic recession has led to
an upsurge in the number of occasions and gatherings at home. Ice creams are being more
frequently consumed as a snack or dessert with family and friends, exhibiting a less seasonal and
more evenly distributed pattern throughout the year. The key drivers in this segment are
convenience, pricing and a size that allows for sharing. Hypermarkets and supermarkets (led by the
big corporations Walmart, Kroger and Costco) are the major retailers, comprising up to 68% of all
take-home ice cream sold in the US 8. As a consequence, these merchants have huge negotiation
power, making or breaking a brand simply by listing it in some of their stores as well as requesting a
retail margin of at least 25% for the privilege of placing the brand’s products in their freezers.
Additionally, they produce and favor their own private labels to compete on pricing with the
established ones.
Finally, there is the artisanal segment (22%), slightly growing over previous years due to increasing
demand for handmade products with high-quality ingredients on the part of more health- and quality-
conscious consumers. Many of these small and mostly local brands, characterized by only limited

distribution in mostly organic and health food stores, do not sell outside their cities or counties.

The US ice-cream market 9 in 2011 was quite fragmented but clearly dominated by food behemoth
Nestlé with 30.6% of market value share. Nestlé makes Häagen-Dazs in the US (although General
Mills Inc. owns the brand) and holds smaller brands such as Eskimo Pie, Skinny Cow Dreyer’s and
Edy’s. Next comes Unilever with 23% thanks to its Breyers and Ben & Jerry’s brands. The company
launched Magnum in the US the same year. Blue Bell (7.5%), Wells Dairy (6.8%) and Mars (2.5%)
plus a myriad of small players with a local presence comprise the rest of the market. Private labels,
which in 2011 were selling, cumulatively, more units than any single brand or company (30% of
volume), accounted for significantly less share in value (18%).
All of the key brands have significant above-the-line presence during the “hot weather” months.
Häagen-Dazs and the recently launched Magnum lead the investment both on TV and online with
campaigns estimated to average about $US 4-6 million per year 10. Because many of the brands have
been present for more than 20 years in the US market, they have already amassed a loyal following
and significant brand awareness. Ben & Jerry’s and Häagen-Dazs garner the highest top-of-mind
recall and the most positive brand associations.
The small brands cannot compete with the investment levels, economies of scale or the wide
distribution networks that the established brands have built nationwide. The small brands limit
themselves to small geographical areas where they have managed to establish strong ties with local
retailers. Distribution is quite costly for them since this requires refrigerated trucks and tight control
of the cold chain: a small interruption can affect quality and flavor, and even fill the product with frost,
rendering it inedible.
The ice cream market shows very little product innovation. Despite US flavor preferences leaning
towards the classics 11, most brands launch new flavors each summer season, promoting them
heavily in stores with leaflets and displays for extra visibility. For example, in 2011, Häagen-Dazs
launched a line of five new seasonal flavors: Caramel Apple Pie, Blueberry Crumble, Cranberry
Pumpkin Spice, Sweet Chai Latte and Spiced Peach Crumble (the last one could only be found in
Walmart, securing the chain’s disproportionate support for the brand’s summer campaign at the point
of sale by giving Walmart this exclusive flavor) 12.
8
9
Estimation based on Euromonitor and Statista.com
10
11
According to the International Dairy Foods Association, the top 5 ice cream flavors in the United States are, in order: 1)
Vanilla, 2) Chocolate, 3) Cookies N’ Cream, 4) Mint Chocolate Chip and 5) Chocolate Chip Cookie Dough.
12
PR Newswire (May, 2011).
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CONSUMER TRENDS
Worldwide growth has occurred in consumer interest in organic products found in all food categories
from the beginning of the century. Although legally and practically different, the natural and organic
labels are often interpreted as being synonymous 13. Many brands take advantage of that confusion.
In the ice-cream market, for example, both Häagen-Dazs and Ben & Jerry’s frequently mention their
“natural ingredients.”
Additionally, at the beginning of 2012, US consumers find themselves still in the throes of the
economic recession beginning in the fall of 2008. Millions of jobs have been lost; families are
watching their house values plummet and their life savings evaporate. The direct consequence of
this global downturn is a decrease in government, company and family spending along with the
advent of a thriftier era for consumers. They no longer spend beyond their means. Instead, they have
started to go out less and drastically reduce non-essential purchases. They also respond to discounts
much more than before and have started opting for stores’ private labels, which are cheaper but
slightly more basic. As mentioned above, the economic recession and its consequences may be one
of the key reasons why the total ice-cream market has declined since 2007. The downturn has also

influenced the rebalancing of the market’s various segments with retail growing at the expense of

foodservice. Within retail, the take-home sub-segment grew while impulse buying declined, as did

the cheaper brands and private label growth.
Finally, in the last few years, a new healthy trend has emerged in the United States where more than
one-third of adults (34.9%) and 17% of children were declared obese in 2010 14. Many programs have
come into effect to promote healthier living and eating. Examples include the “Let’s Move” campaign
heralded by then-First Lady Michelle Obama and created to “solve the problem of childhood obesity
within a generation” 15 as well as multiple interventions funded by the Center for Disease Control and
Prevention (CDC) at both the state and community level 16.. This healthy trend has affected the ice-
cream market, where, as previously stated, consumption per capita has been steadily decreasing
with consumers moving to other snacks and desserts lower in calories and fat such as frozen yogurt.
Currently (in 2012), some brands are already exploiting this new health trend. Nestlé’s Skinny Cow
leads the pack thanks to their ice cream without artificial sweeteners. This product contains only 87
to 141 calories and no more than 2.6 grams of fat per unit (sandwich or bar) compared to the 500
calories or more and 35 grams of fat that a regular Häagen-Dazs or Ben & Jerry’s pint usually
contains 17.
Millennials, prone to follow fads and trendy diets, comprise one of the more health-driven groups.
These younger consumers, nevertheless, are also more hedonistic than their elders are. Always on
the lookout for indulgent purchases feeding their more narcissistic side, they treat themselves every
occasionally just for pure enjoyment.
Kids aged six to eight represent nearly 40% of total consumption in the ice-cream market. They
constitute its largest consumer segment. They also feature the highest consumption frequency
(about 2.3 times per week) and weigh heavily in the impulse segment. This segment is followed by
young adults (18-35 years), a group with high disposable income, which represents 26% of the
market. However, they have decreased significantly compared to previous years as they move to
frozen yogurt and other healthier desserts and snacks, compiling a consumption frequency of about
three times per month. The 35 to 50 age group exhibits a much lower consumption level (22%) and
a frequency of around 1.5 per month. Nonetheless, this segment leads in purchases as they buy for
13
Study: Consumers confuse natural and organic labels (2015) and Food Labels: Definition of Natural & Organic (2015).
14
Ogden CL, Carroll MD, Kit BK & Flegal KM. Prevalence of obesity in United States, 2009–2010.NCHS Data
Brief. 2012;(82):1-8
15
letsmove.obamawhitehouse.archives.gov
16
Khan LK, Sobush K, Keener D, et al. Centers for Disease Control and Prevention Recommended community strategies
and measurements to prevent obesity in the United States. MMWR Recomm Rep. 2009;58(RR-7):1–26
17
https://www.nutritionix.com/food/ben-and-jerrys-ice-cream and https://www.nutritionix.com/food/haagen-dazs
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the whole family including their kids. Finally, the above-50 segment trails with its 12% of category
consumption last year and a frequency of approximately four ice-cream purchases per year 18.
A recent 2011 survey published by a sector magazine 19 defined consumer segments in another way:
a) Gregarious Socials (29%) regard ice cream as the perfect dessert to share with friends and
family at the end of a meal. They prefer simple flavors and sizes that allow for sharing. They
tend to have kids and frequent at-home get-togethers.
b) Experimental gourmets (25%), the most sophisticated of all ice-cream consumers, are always
open and willing to try something new, be it new brands or new flavors. They care most about
flavor and the consumption experience, looking for the best and most delicious products
(always branded, of course) and are ready to pay a premium.
c) Low-involvement basics (23%) always buy the same brand, product and flavor, mostly in larger
sizes, even if for individual consumption. They have a money-conscious approach to the
category: they buy a lot of private labels but splurge on branded products every now and then

for special occasions and get-togethers with friends..

d) The health conscious (14%) are mostly young adults who see food as a way to maintain or
promote health. They shop for organic, natural and low-calorie/low-sugar products even if they
cost a bit more, and frequently check labels for calories and “bad” ingredients like sugar. For
them, ice cream is a guilty pleasure, an indulgence they love but limit because it makes them
feel bad afterwards.
e) Non-buyers (9%) either do not like ice cream or cannot have it for health reasons (diabetics or
allergic to lactose, for example).
Included in the package a very nice letter from Justin outlining the information and asking again for
your advice, now that you have most of what you had said you needed. He also offers to pay for a
trip to Los Angeles to meet again and discuss the matter in person if you decide to help him. Looking
forward to this great opportunity, and inspired by his deep commitment to his project, you decide to
skip dinner and delve into the data.
How would you apply your recently acquired knowledge of behavioral economics to help
Justin analyze the data and make a decision?
And what about consumers? Any tips you could give him to better understand and influence
them?
18
19
Ibid.
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SECTION 3: THE MARKETING PLAN
As part of the package, Justin has also included a draft document in which he has decided to share
his early marketing ideas with you, the options he feels he’s facing and the questions he has about
it all.
PRODUCT
Justin wants to start with only one size, the pint, because he feels that is the market standard and
the one allowing him to appeal to the most consumers. Besides, he remains keen on highlighting
that a person can eat a whole pint at once and remain fit and healthy. He has requested some studies
on the product that he has developed and estimates that his pints can offer as few as 280 calories
and four grams of fat, with 20 grams of protein.
What kind of packaging would you recommend, he asks? How should it look? And what would be
the preferred assortment? Should he go for the standard “most-liked” flavors or unique ones?

PRICE
He also asks for your input on pricing. He has come up with some numbers for his cost structure,
estimating that the current production cost of each ice cream pint at his home reaches $US 3.10
(factoring in ingredients, electricity and the standard pint packaging with printed labels). He has also
been asking around at some factories and estimates that if he were to produce a big batch (at least
10,000 pints), he would be able to reduce that cost to $US 1.85 or $US 1.35 (at least 100,000 pints),
and even less for higher quantities.
Justin thinks that he would benefit from having the same price as Häagen-Dazs and Ben & Jerry’s
but is considering going a bit lower to get consumers to try his ice cream. Is that feasible? What is
your price recommendation, and what should he take into account to set his price?
DISTRIBUTION
Justin is a bit lost regarding distribution. He feels there are many feasible options he could pursue.
Should he go to restaurants, cafeterias and artisanal ice creameries first to introduce his product or
should he go the retail route? What kind of outlets will be more important for his products and more
willing to sell them? Should he try to sell online? Should he try to go national from the outset or be
content with local distribution? And, in either case, who should be his key retailers?
He thinks the easiest for him is to continue producing at home and sell through health-focused stores.
Yet, he fears that if he goes that route, he won’t realize any significant profit.
PROMOTION
What should he do to promote his brand and create some awareness among consumers? Justin is
very worried that he will not be able to advertise the brand at all as he doesn’t have the level of
resources and capital that a big TV campaign would require. He defers to your deep marketing
knowledge: do you have any suggestions about how he should deliver his message?
What would be your recommendation for the 4Ps (product, price, place, promotion)? And how
would you employ your knowledge of consumer behavior to design them?
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ANNEXES
ANNEX 1
ICE CREAM MARKET VALUE IN THE US, 2011 (SEGMENTS AND SUB-SEGMENTS) 20

ANNEX 2
COMPANY VALUE SHARES IN THE ICE CREAM RETAIL MARKET (USA, 2011) 21
20
Case specific estimations, based on Euromonitor data and statista.com
Case specific estimations, based on Ice Cream In The US. (2014). Euromonitor International Ltd. Retrieved from
21
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ANNEX 3
AVERAGE PRICE PER PINT (BEFORE TAXES) OF TOP BRANDS IN THE US MARKET (2011) 22
US ICE CREAM MARKET - AVERAGE PRICE PER PINT (2011)

Häagen-Dazs $ 5.25
Ben & Jerry's $ 5.25
Blue Bunny $ 4.50
Magnum $ 4.00
Breyer's $ 2.75
Skinny Cow $ 2.60
Blue Bell's $ 2.50
Edy's $ 1.80
AVERAGE $ 3.58

ANNEX 4
HÄAGEN-DAZS 2011 BRAND EQUITY PYRAMID 23
Consumer-Based Brand Equity Pyramids

ANNEX 5
22
Case specific data compilation
Sources: "Strategic Brand Management: Building, Measuring, and Managing Brand Equity" by Kevin Lane Keller.
23, 24 & 25
© Pearson Education Limited 2013

Häagen-Dazs, Ben & Jerry’s and Skinny Cow’s data compilation and elaboration are specific for this case.
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BEN & JERRY’S 2011 BRAND EQUITY PYRAMID 24

ANNEX 6
SKINNY COW’S 2011 BRAND EQUITY PYRAMID 25
Sources: "Strategic Brand Management: Building, Measuring, and Managing Brand Equity" by Kevin Lane Keller.
23, 24 & 25
© Pearson Education Limited 2013

Häagen-Dazs, Ben & Jerry’s and Skinny Cow’s data compilation and elaboration are specific for this case.
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ANNEX 9
ANNEX 8
ANNEX 7
EDY’S PACKAGING
MAGNUM’S PACKAGING
BEN & JERRY’S PACKAGING

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IE Business School
12
■■■
ANNEX 10
HÄAGEN-DAZS PACKAGING
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320-0081-1

HALO TOP ICE CREAM & BEHAVIORAL ECONOMICS

SECTION 1: A NEW YEAR’S DILEMMA

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Purchased for use on the Managerial Economics, at Lauder Business School.

Distributed by The Case Centre North America Rest of the world

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

SECTION 2: AN UNEXPECTED PACKAGE

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Christian Reiner, from 25-Aug-2021 to 10-Feb-2022. Order ref F420379.

THE ICE CREAM MARKET IN THE UNITED STATES IN 2011

MARKET AND COMPETITORS OVERVIEW

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Christian Reiner, from 25-Aug-2021 to 10-Feb-2022. Order ref F420379.

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Christian Reiner, from 25-Aug-2021 to 10-Feb-2022. Order ref F420379.

Purchased for use on the Managerial Economics, at Lauder Business School.

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Christian Reiner, from 25-Aug-2021 to 10-Feb-2022. Order ref F420379.

SECTION 3: THE MARKETING PLAN

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http://ezxy.ie.edu/login?url=https://search-proquest-com.ezxy.ie.edu/docview/1637648042?accountid=27285 on March 2019

US ICE CREAM MARKET - AVERAGE PRICE PER PINT (2011)

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Consumer-Based Brand Equity Pyramids

© Pearson Education Limited 2013

BEN & JERRY’S 2011 BRAND EQUITY PYRAMID 24

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© Pearson Education Limited 2013

BEN & JERRY’S PACKAGING

Purchased for use on the Managerial Economics, at Lauder Business School.

Purchased for use on the Managerial Economics, at Lauder Business School.

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