Case Analysis: Boston Creamery, Inc.

Introduction: Boston Creamery is actually one of the divisions of a larger group that specializes in the Food Industry, and Boston Creamery specializes in low-end traditional activity ice cream!. Boston Creamery is a "rofit #trategic Business $nit #B$!. %hey recently installed a new Financial "lanning and Control #ystem, and the forecast for &'() was different from the actual results of operations. %his was the first year when they could compare the forecast to the actual operating results. %hey need to ma*e a forecast for &'(+ that will ,e closer to the actual results. I. Industry Analysis and the Firm-s #trategies: &.& "orter-s Five Forces: Supplier Power: %he two primary suppliers of *ey inputs are dairies that produce mil* and companies that sell sugar in ,ul* .uantities. %here are many suppliers, to it is not easy for suppliers to drive up prices. %hese two *ey inputs are not uni.ue products, so their strength and control over Boston Creamery is low, and there is little cost of switching from one to another. Boston Creamery does not have a great need for suppliers/ help, and the company has many supplier choices. %he ma0or factor is national prices for mil* and world prices for sugar. Buyer Power: Ice cream is a generic product, which can ,e made ,y many different companies with the same .uality, the same ingredients and the same pac*aging. %hus, ,uyers have power to choose ,rands. %his is why Boston creamery has chosen to compete on the ,asis of price. %here is little or no cost for each individual ,uyer to switch from Boston Creamery products to those of someone else. 1n the other hand, the company does not have to deal with few powerful ,uyers, so the retail stores that sell to the individual ,uyers they are not a,le to dictate terms to Boston Creamery. Competitive Rivalry: %he mar*et for ice cream is mature, with companies competing for share of a mar*et that is not growing. %hus, there are many competitors, and they offer e.ually attractive products, so Boston Creamery has little power in the situation. If suppliers and ,uyers don-t get a good deal from Boston Creamery, they-ll go elsewhere. 1n the other hand, companies li*e Ben 2 3erry and 4agen 5azs have ,uilt their own niche mar*ets for specialty and premium ice cream products, where they do something that no,ody else can do, so they have tremendous ,argaining strength. %hey set much higher prices for their patented recipes of premium and specialty ice cream, compared to the generic flavors and styles of Boston Creamery. Threat of Substitution: %here are many su,stitutes for the ice cream products that Boston Creamery produces and mar*ets. It is not uni.ue. %his wea*ens the

company-s ,argaining power. 6ot only do other companies ma*e ice cream, ,ut the recipes are mostly openly *nown and not a secret formula, and not a patented process. In addition, there are frozen ices and frozen yogurt that can replace ice cream as a treat or dessert. In fact, many people regard frozen yogurt as ,etter for their health, compared to ice cream. %hus, consumers have many choices and this dilutes the ,argaining power of Boston Creamery. Threat of New Entry: %he a,ility of people to enter this mar*et is high. It costs little in time or money to enter the mar*et and compete effectively. 1n the other hand, there are economies of scale in place which ma*e it more costly to produce smaller .uantities of the product. 4owever, there is little protection for *ey technologies, so new competitors can .uic*ly enter the mar*et and wea*en Boston Creamery-s position. %here are no strong and dura,le ,arriers to entry, so it is difficult to preserve a favora,le position and ta*e fair advantage of it. An e7ample of new entry is Cold #tone Creamery, which too* advantage of the 8#tar,uc*s effect9 with their personalized choice where customers could choose a com,ination from more than &: ice cream flavors and any com,ination of ); mi7-in ingredients. at an upscale store where customers waited in long lines to pay high prices. %his super premium chain of ice cream stores created a new mar*et niche for old product in a new type of distri,ution. %he mar*eting was also a ma0or factor in their success. 8#uper-premium mi7-in chains such as Cold #tone Creamery and <ar,le #la, Creamery 6o. '& on Entrepreneur/s list! are hot even as overall ice cream store sales remain flat at =' ,illion a year. Accelerating store rollouts, e7asperatingly long customer lines and am,itious glo,al e7pansion plans all signal they are ta*ing ,usiness away from the chocolate- and vanilla-variety shops9 4irschfeld!. &.: >valuation of the ?eneric #trategies Chosen ,y the Firm Boston Creamery has chosen to compete on price, ,ut the company ended up with a much higher price than planned, due to cost overruns. %hese overruns were primarily due to costs of production, with a great share of those costs coming from salaries to production wor*ers. In spite of these pro,lems, "eterson and @o,erts ,elieve that they had a good year with increased profits due to increased sales. 1nly the Controller, Aance, can see that profits are lower. &.:.& 3im "eterson says that the initial report from Fran* @o,erts loo*s good, ,ut he wants him to ,rea* it down and highlight the areas that need to ,e corrected, as well as those things that went well. &.:.: A personal conflict is developing within the management team. Fran* @o,erts thin*s that 3ac* Aance goes over,oard with the technical aspects of accounting

pro,lems. 3im "eterson as*ed for a non-technical presentation. 1n the other hand, 3ac* Aance ,elieves that Fran* @o,erts is ignoring the pro,lems in order to ma*e himself loo* good. &.:.) %he managers are not wor*ing well together. %hey are each fighting to defend their own position, and failing to loo* at the factors that will contri,ute to the company-s success and profita,ility. II. Issues at 4and 2.1 %he Case descri,es a conflict within Boston Creamery-s management team, which is ,ased upon their disagreement over the variance analysis.. %hey need to learn the ma0or reasons for the favora,le operating income variance of =(&,(BB. %hey also need to develop tools for ,udgeting that will ,e more accurate with regard to sales forecasts, as well as costs and prices for the ice cream products that are mar*eted ,y Boston Creamery. :.: %he favora,le variance of operating income was due to the larger size of the overall mar*et, plus the higher prices charged for the product, compared to the forecast. It was not due to increased mar*et share. :.:.& %he favora,le variance of operating income does not translate into higher profits for Boston Creamery. In fact, the actual income from operations was only =(&(,&BB, compared to the ,udgeted =(C),&BB for actual sales, even though sales were much higher and the price was higher than the forecast. :.:.: %he variance is actually due to the volume of production, the volume of sales and the higher price, and it was not calculated correctly. %hey ,ased the variance on the ,udget forecast of production and sales, ,ut they should ,ase it upon the actual production and sales. :.:.) %hey actually had an unfavora,le manufacturing variance. %he variance is negative, when you loo* at the profits from actual sales and production, instead of the ,udgeted sales and production in the forecast. :.:.+ 3im "eterson wants Fran* @o,erts to as* for help from the Controller, 3ohn Aance, to ma*e the variance report. But "eterson does not li*e to use information from an accountant. 4e ,elieves that it will ,e ,oring. @o,erts only as*ed Aance for written materials dealing with mi7 variances and volume variances. :.:.D

3ac* Aance produced figures showing that the variances were a ,ig pro,lem that affected the profita,ility of the company. In fact, he states that the variances are actually negative, not positive. :.:.C %hey also need to loo* at the profit contri,ution of each flavor, pac*age and size of ice cream that they produce and sell. In >7hi,it A, 3ac* Aance shows that the two gallon size in a paper carton ma*es the smallest profit contri,ution of only :C.D cents per gallon. %he one gallon size of premium ice cream ma*es the highest profit contri,ution of (:.D cents per gallon. %he one gallon size of regular ice cream in a paper carton has a profit contri,ution of )+ cents per gallon, and the one gallon size of regular ice cream in a plastic carton has a profit contri,ution of )B.D cents per gallon. 2.3 %hese management mem,ers must learn to wor* as a team. %hey should not ,e fighting each other. %hey need to ,uild a team that is ,ased on 8feeling part of something larger than yourself. It has a lot to do with your understanding of the mission or o,0ectives of your organization9 4eathfield!. >ach manager should contri,ute to the overall success of the organization ,y wor*ing with other mem,ers of the organization to produce results. >ach one has a specific 0o, function and ,elongs to a specific department, ,ut they all must wor* with other organization mem,ers to accomplish the overall o,0ectives of the firm. :.).& %he team is geared to more than 0ust one specific goal. In other words, the performance of the new Financial "lanning and Control #ystem is not the only goal of teamwor*. %hey need to operate as a team for the larger picture of the continuing overall success of the company. Conclusion %he management needs to e7amine many factors in their operations, as well as in the new Financial "lanning and Control #ystem. For e7ample, they need to loo* at their product mi7 and see if they can ma*e some changes that will ma*e it more profita,le. If the two gallon size is ma*ing very small profit contri,utions, then may,e they should stop producing and selling that size. %hey also need to wor* together as a team, to avoid personal conflict and wor* together toward the goals and mission of the company. %hey have not defined their goals clearly. %he performance metric is simply ,eing used to measure the financial results, and management does not even agree on what those results mean. III. Current Control #ystems at Boston Creamery, Inc. ).& %he company had installed a new financial planning and control system. %hey made their ,udget for &'() in 1cto,er of &'(:, so they had to use the estimated final earnings for &'(:, when they made their forecast for

&'(). "eterson felt that they could ,ring in more formal forecasting techni.ues and concepts to refine the system in later years. %hese changes are not 0ust refinements. %hey are necessary to ma*e accurate calculations of the profita,ility of the company-s operations. ).: %he forecast of varia,le operating costs was much lower than the actual costs, which resulted in a higher cost of production, and therefore a higher consumer price than planned for the products. %hey underestimated the size of the total mar*et, which resulted in underestimating the sales for Boston Creamery. In addition, they underestimated the costs of production. <oreover, they failed to compare the actual results of operations every month, so they did not discover the difference ,etween the forecast and the actual volume until the spring.

).)

).).& %he company lac*s a clearly defined strategy, clearly defined goals and clearly defined measures of operating results. ).).: %he forecast ,udget was ,ased upon estimates of the operating results of the previous year. 6o goals were set for the current year. ).).: Boston creamery-s management does not seem to have clear goals or to understand what they need to measure with their new Financial "lanning and Control #ystem. %he goal of such a system is to provide information on selected measures of financial performance in order to assess the financial condition and operating performance of the company. ).).+ %here are many metrics to choose from, ,ut it seems that Boston creamery is only using the net operating revenues ratio. It tells them whether the firm-s operating activities resulted in a net deficit or surplus for the year. %hey could also choose the return on net assets ratio, ,ut they did not do that. It would tell them whether the firm is doing ,etter this year than it did nEin previous years. %he case also does not e7amine the de,t ,urden, or the via,ility of the firm. @ecommendations %he mar*eting team needs to find ,etter ways to forecast sales and operating costs. %hey also need to calculate the actual variance ,ased upon the actual level of production. %he forecast of fi7ed operating costs was ,ased upon the forecast level of production, ,ut the analysis of actual results should ,e ,ased upon the actual level of production.

%hey also need to monitor the ,usiness activities regularly, and ma*e monthly comparisons of the results to the forecast. In addition, they need to set strategic goals and then use the new <C# to measure how well they achieve those goals. <oreover, they need to consumer non-financial factors, such as customer satisfaction, efficiency of the manufacturing processes, and so forth. IA. Critical >valuation of the <anagement Control #ystems at Boston Creamery, Inc. +.& >valuation of the Boston Creamery-s Choices of the %ypes of <C# <anagement needs to determine which costs can ,e controlled and which costs cannot ,e controlled. For e7ample, the varia,le costs of cartons depend upon the volume produced and can ,e controlled ,y controlling the level of production.. %he varia,le costs of sugar and mil* might not ,e su,0ect to control ,y Boston Creamery if the suppliers raise the prices, ,ut they can get lower prices per unit when they ,uy in higher volume to supply increased production. %he fi7ed costs of sales salaries could ,e controlled ,y increasing or decreasing the size of the sales force. %he fi7ed costs of depreciation of the plant e.uipment is e7tremely fi7ed and is not li*ely to change with increased or decreased volume of production. %hey need to e7plore economies of scale, engineering processes, product mi7, and so forth. +.&.: 8Fine %uning9 the 6ew Financial "lanning and Control #ystem %he e7pectation ,y 3im "eterson that they could add in the formal sales forecasting techni.ues and concepts later has resulted in a forecast that is wrong, and a ,udget that does not match the real situation. <oreover, since they did not monitor that firm-s activities every month, and they did not compare those figures to the ,udget every month, they did not realize that they had a ,ig pro,lem until the spring. +.&.) Financial "erformance <etrics 8%raditional financial performance metrics provide information a,out a firm/s past results, ,ut are not well-suited for predicting future performance or for implementing and controlling the firm/s strategic plan. By analyzing perspectives other than the financial one, managers can ,etter translate the organization/s strategy into actiona,le o,0ectives and ,etter measure how well the strategic plan is e7ecuting9 8%he Balanced #corecard9!. +.&.+

%he case does not address the compensation system or the distri,ution system. %hose would ,e ma0or factors in assessing the possi,ility of cutting costs, streamlining processes and so forth. $nfortunately, they cannot ,e specifically addressed without information that is not discussed in the case. It would ,e especially important to *now a,out the compensation system, since the ,iggest cost overruns were in the production salaries. Conclusion <anagement needs to ,rea* down the different areas of the performance metric to determine which costs can ,e controlled, as well as the actual results of operations. %hey also need to ta*e more than one perspective, not only the financial point of view, ,ut also other factors that affect the operations and profita,ility of the company. Fhen planning their strategy, they need to consider four areas: financial performance, internal processes, customers, and learning and growth. >ach one of these four areas has o,0ectives, measures, targets and initiatives. <anagement needs to ,alance all four of these areas ,y defining and using the o,0ectives, measures, targets and initiatives. Strategic objectives - what the strategy is to achieve in that perspective. easures - how progress for that particular o,0ective will ,e measured. Targets - the target value sought for each measure. !nitiatives - what will ,e done to facilitate the reaching of the target. 8%he Balanced #core Card9! +.: Consistency of the "erformance <etric %hey used the same general approach for ,oth the varia,le product standard costs and for fi7ed costs. %hey had to ad0ust the ,udget in spring of &'() when it ,ecame o,vious that sales would ,e much higher than the forecast. %hey had to ad0ust costs as well as sales in their forecast. +.:.& >ach mem,er of management draws a different conclusion from the performance metric. 3im "eterson sees record high sales for ice cream. Fran* @o,erts sees increased profita,ility for the company. 3ac* Aance sees a reduction of profits on each unit of ice cream sold. %hus, each manager has a different picture of the operating results, ,ased up on the same performance metric. +.:.: %he o,0ectives of the new performance metric were not clearly defined. If the firm see*s growth, the measure will ,e revenue growth. If the firm see*s

profita,ility, the measure will ,e return on e.uity. If the firm see*s cost leadership, the measure will ,e unit cost. +.:.) %he ice cream mar*et is not in the growth stage. It is in the mature stage, so revenue growth is not the goal, unless the firm can achieve it ,y gaining more share of a sta,le mar*et that is not growing. %hey already have a,out half of the mar*et in their region. +.:.+ 4owever, Boston Creamery was measuring mar*et share compared to their competitors. %his has ,een the standard way to measure mar*et share, ,ut it is not clear how they measure it. Are they 8tal*ing a,out dollar mar*et share, our share of the revenue from the industry, and someone else might ,e tal*ing a,out unit mar*et share, our share of the units ,eing sold9 @ei,stein!. <oreover, are they loo*ing at the ice cream mar*et, or the mar*et for all frozen desserts, or some other mar*etG It is not clearly defined. +.:.D Boston Creamery is competing on the ,asis of price, so they are pro,a,ly seeing the company as ,eing in the sustain stage, where the goal is increased profita,ility. %hus, it is not yet in the harvest stage, where the goal would ,e to increase cash flow and reduce capital re.uirements. +.:.+ 4owever, the management was wrong when they thought that the mar*et was mature. %heir increased sales actually came from growth in the overall mar*et, not from increased share of the sta,le mar*et. Conclusion %he performance metric needs to ,e improved. It needs to reflect the source of the positive variance, including sales volume and price, as well as the negative effects of costs. +.) Critical >valuation of the "erformance <etric %he performance metric has not led to understanding of the operating results. It has given each manager a different view of the results, leading to conflict among management. +.).& <anagement needs to determine the marginal contri,ution of each product ,y determining the fi7ed and varia,le costs, and then use the sales forecast to arrive at a total marginal contri,ution ,y month. "rofit variance should ,e calculated

monthly. In addition, the variance should ,e calculated upon the ,asis of actual volume, not the forecast. +.).: 3ac* Aance shows the figures in >7hi,it A, that the profita,ility of the ice cream sales was actually lower per unit, compared to the previous year. +.).) For e7ample, in 3anuary D:B,BBB gallons of ice cream, ,ut they ,ased the analysis on the forecast of only +'D,BBB gallons. %he revenues for 3anuary area actually =:;,;(D under the forecast for the actual sales. %he earnings statement, which is >7hi,it C in the Appendi7 to the Case, shows that the actual manufacturing costs were =D'),:;( compared to the ,udgeted costs of only =D(B,D)(. %hus, the variance due to operations was a negative =::,(DB. %he actual operating profit was only =':,);) compared to the ,udgeted =&&D,&)). %hus, the negative variance due to volume and mi7 was a negative =C,&:D. Adding the two variances gives the total negative variance of =:;,;(D. Conclusion <anagement did not see the variance until the spring, three months into the year. %hey should calculate the variance very month and ma*e decisions accordingly. Also, management needs to improve the way they use their new Financial "lanning and Control #ystem. %hey also need to ,ase their analysis on the actual volume of production and sales. A. %eamwor* at Boston Creamery D.& %he team mem,ers do not seem to clearly understand the e7pectations. %eamwor* depends upon clear e7pectations. "erhaps 3im "eterson has not clearly communicated his e7pectations for the team-s performance and e7pected outcomes. %hey are in a personal conflict and they do not seem to understand why they are wor*ing together, or purpose that the company has to support the team with resources of people, time and money. %he wor* of the team needs to 8receive sufficient emphasis as a priority in terms of the time, discussion, attention and interest directed its way ,y e7ecutive leaders9 4eathfield!. %he conte7t of the wor* seems to ,e unclear. @o,erts thin*s that the accounting data from the Controller will ,e ,oring, while Aance thin*s that @o,erts is only trying to ma*e himself loo* good ,y leaving out the accounting data. %hey do not seem to understand how their teamwor* will help the organization achieve its ,usiness goals. %hey do not seem to understand where their wor* fits in the total conte7t of Boston Creamery-s goals, principles, vision and values. Another important factor in teamwor* is commitment. %he managers do not seem to have the desire to participate on a team. %hey seem to feel

D.:

D.)

that their own specific tas*s are more important than the company-s mission or the goals of the team. %hey do not seem to ,e committed to accomplishing the team mission and e7pected outcomes. %hey seem to ,e defensive a,out their own areas of e7pertise, and not viewing this tas* of evaluating the <C# as an e7citing challenge or an opportunity to wor* together as a team. D.+ It is also very important to match each managerHs strengths and s*ills to his or her 0o, and the tas*s that are assigned to the manager @o,,ins!. In this case, it seems that 3im "eterson should not as* @o,erts to analyze the new Financial "lanning and Control #ystem, or the profita,ility of the operations during the past year. %hese are accounting tas*s. Aance is the Controller, so he should ,e doing the analysis. After Aance presents the results from the accounting point of view, then @o,erts and other managers should ,e as*ed to present their reports. %hey need to understand what the pro,lem is with the profita,ility, and that is an accounting tas*. %he accountant should do it. 4owever, all of this information is important to all of the management team, including the mar*eting manager and the C>1. %hey all need to *now 8what each of these measures mean, how to collect each of these measures, and how to apply the *nowledge that you gain ,y having these measures9 @ei,stein!.

D.D

D.C

?eneral Conclusion %he ,udget is the *ey planning tool,o7 of the ,usiness manager. An effective ,udget must ,e a plan that is timely and measura,le. Its dual purpose is a planning tool and monitoring tool. "oor ,udgeting can demotivate its users and readers. In addition to ,eing an effective cash measurement tool of every ,usiness decision and transaction, the ,udget can also serve as an early warning indicator and guide to li.uidity. "reparing a ,udget re.uires the clear identification of all ,usiness costs and revenues for the specified period. %he timing of these revenues and costs is also essential. %he for each period of time has to ,e determined. %he ,usiness needs to *now how to respond to the short and long term results of operations. %he <C# should loo* at the ,udgeted costs and revenues for actual volume, not for the pro0ected volume. %he failure to do this ma*es the variance appear to ,e positive, when it is actually negative. %his means that the analysis is failing to show management that costs need to ,e controlled. 1verall, the new Financial "lanning and Control #ystem at Boston Creamery needs to ,e used properly, ,ased on actual volume of production and sales. <ore importantly, they need to ,uild a management team that wor*s together without personal conflict over ,usiness matters.

Finally, they need to measure other factors ,esides financial performance. For e7ample, what do customers want in terms of new products, on time delivery and so forth, in addition to price. 4ow can the internal processes ,e improved in terms of not only cost, ,ut also cycle time, yield, design productivity, engineering efficiency and manufacturing e7cellence. Fhat can the company learn in terms of manufacturing, product focus and management competence 8%he Balanced #corecard9!. %he company needs to achieve strategic alignment. Boson Creamery has en0oyed growth in sales ,ut has suffered decreased profita,ility. %hey need to define their performance metric in terms of strategic goals, ,ut their goals first need to ,e clearly defined. %hen they need to assign values to the strategic goals and measure those targets. Boston Creamery has not e7amined ways to increase their mar*et share. %hey have not loo*ed at customer satisfaction. %hey simply continue producing and mar*eting and distri,uting the same products ,y the same methods, while companies li*e Ben 2 3erry, 4agen 5azs and Cold #tone Creamery en0oy success and growth ,y introducing new products, distri,ution centers and methods, and mar*eting images that have ,uilt mar*et niches that are in the growth stage. Boston creamery remains in the mature stage ,y doing nothing to change their position. If the strategy is not changed, then Boston creamery-s ,est means of increasing profita,ility is to cut costs. %hus, they need to achieve economies of scale and to cut the costs of production salaries. 5ave @ei,stein wrote a ,oo* a,out metrics for 8mar*eting managers is ,ecause all the time we are wor*ing with all the sets of metrics and more. . . And we need to ma*e sure that we have a good understanding of these measures that we/re gathering, including some of the flaws in how they might ,e measured, and some of the alternate interpretations. %he reason it/s relevant for others in the organization who aren/t even in mar*eting is ,ecause we may find mar*eting says something a,out what our mar*et share is, or what our margins are, and we/re communicating in those mar*eting terms that we need to ma*e sure we understand what it is that is really ,eing said a,out the status of the firm.9 Boston Creamery-s management does not seem to understand what the metrics are saying a,out their firm. @ei,stein also tells us: Both mar*eting managers and C>1s should ,e loo*ing at these metrics, and the reason is ,ecause we/re ma*ing ,udget allocation decisions, and the .uestion is, are our decisions really wor*ingG #o, for e7ample, last wee* in class, I had the president of 5iageo mar*eting in my class. 4e has a mar*eting ,udget of in e7cess of =:.: ,illion. 4e would li*e to *now, as I spend this money, is it really

deriving anything for meG Are people aware of all the different ,rands that I have, and I want to follow it all the way through the pipeline of going from awareness down to consideration to preference and gaining distri,ution and trial and purchase. Fhere I am in the status of all thatG $ltimately, I want to *now that when I spend =:.: ,illion, that there/s some return that I/m getting for that. Clearly, that the head of mar*eting is concerned a,out, am I spending wisely around alternative considerations, and certainly the C>1 would li*e to *now, I put this =:.: ,illion plus over here, should I have ,een spending it somewhere else in the organizationG #o it/s important for ,oth.

@eferences 4eathfield, #usan <. 8%welve %ips for %eam Building: 4ow to Build #uccessful For* %eams.9 Iour ?uide to 4uman @esources. http:JJhumanresources.a,out.comJodJinvolvementteamsJaJtwelveKtipKteam.htm 4irschfeld, Bo,. 8Fhat-s 4ot in ice CreamG9 @etail %raffic. #ept. :+, :BB(. @ei,stein, 5ave. Interview. Fharton 3ournal. <ar*eting <etrics and Financial "erformance. Publishe": #pril $%& $''% in (nowle"ge)*harton+ @o,,ins, #teven. 8Build Iour <anagement %eam.9 http:JJwww.entrepreneur.comJgrowyour,usinessJhowtoguidesJarticle;)C&;.html 8%he Balanced #corecard.9 6et <BA. http:JJwww.netm,a.comJ

Appendi7 5efinitions

!ce Cream ,eco"e"

#uper-"remium Ice Cream has very low air and high fat content, and uses only the highest .uality ingredients. Ice Cream is a frozen dessert product containing at least &B percent mil*fat and at least :B percent total mil* solids, safe and suita,le sweetener and optional sta,ilizing flavoring and dairy-derived ingredients. @educed Fat Ice Cream is made with :+ percent less fat than ice cream. Light or Lite Ice Cream is made with DB percent less fat or &J) fewer calories than ice cream, provided that, in the case of calorie reduction, less than DB percent of the calories are derived from fat. Low-fat Ice Cream contains no more than ) grams of fat per serving. 6onfatJFat-Free Ice Cream contains less than B.D grams of fat per serving. 6o #ugar Added Ice Cream may contain artificial sweeteners, ,ut is not sweetened with added sugar. #or,et is a frozen dessert similar to an ice. It is a nondairy product. Frozen Iogurt is a frozen dessert similar to nonfatJlow-fat ice creamM mi7es containing cultured s*im mil* and live active cultures. %he fat content is less than + percent. Source: Cold Stone Creamery Industry Overview 4irschfeld!

BACN?@1$65>@ <edia Contacts: <iranda @o,ertson <arti "upillo :B:J()(-I5FA -./0 !S N#T!1N#/ !CE CRE# 1NT2

In &';+, "resident @onald @eagan designated 3uly as 6ational Ice Cream <onth and the third #unday of the month as 6ational Ice Cream 5ay. 4e recognized ice cream as a fun and nutritious food that is en0oyed ,y a full 'BO of the nation/s population. In the proclamation, "resident @eagan called for all people of the $nited #tates to o,serve these events with Pappropriate ceremonies and activities.P %he International Ice Cream Association IICA! encourages retailers and consumers to cele,rate 3uly as 6ational Ice Cream <onth. In :BB(, 6ational Ice Cream 5ay will ,e #unday, 3uly &D. %he $.#. ice cream industry generates more than =:& ,illion in annual sales and provides 0o,s for thousands of citizens. A,out 'O of all the mil* produced ,y $.#. dairy farmers is used to produce ice cream, contri,uting significantly to the economic well-,eing of the nation/s dairy industry. Founded in &'BB, IICA is the trade association for manufacturers and distri,utors of ice cream and other frozen dessert products. %he association/s activities range from legislative and regulatory advocacy to mar*et research, education and training. Its ;B mem,er companies manufacture and distri,ute an estimated ;DO of the ice cream and frozen dessert products consumed in the $nited #tates. IICA, as a constituent organization of the International 5airy Foods Association, can ,e found online at http:JJwww.idfa.orgJ. QQQ

.nite" States 3ro4en ,airy Pro"ucts %he $nited #tates is responsi,le for developing the frozen dairy dessert industry into what it is today, and consumers worldwide recognize this level of innovation and .uality. Cutting-edge technological achievements in the areas of ingredients, manufacturing e.uipment and pac*aging have ena,led $.#. processors to develop a frozen dairy dessert for every consumer/s nutritional needs and taste preferences. As glo,al demand increases for consistent, high .uality frozen dairy products, the $.#. frozen dairy dessert industry is well positioned to meet the challenge. *hy Buy .+S+ 3ro4en ,airy Pro"ucts5 *orl"6s largest fro4en "airy pro"ucts pro"ucer Appro7imately +BO of the world/s frozen dairy desserts D.; ,illion liters!R are manufactured at more than +DB $.#. ice cream plants, ma*ing the $nited #tates the largest country producing ice cream and related products in the world. From &''+ to :BB+, $.#. frozen dairy dessert production increased an average of ;O, an increase of close to DC million liters per year. %he $.#. frozen dairy products industry is capa,le of unrestrained growth to meet glo,al demands, than*s to: the largest mil* supply in the world, an a,undance of land and, investments in research and development. # wi"e variety of choices $.#. producers e7port a wide variety of ice cream styles, including: Psuper premiumP products, made with a high ,utterfat content, nonfat, low-fat or light products, and sugar-free premium novelties and desserts. Flavors range from traditional favorites such as vanilla, chocolate and straw,erry to uni.ue ones such as toasted almond or green tea. %ypical container sizes of ice cream and frozen yogurt include &(B ml cups, pints, gallons, half liters, liters and other large containers for retail and foodservice sales. In addition, dozens of types of frozen novelties are e7ported throughout the world. State7of7the7art pro"uction facilities %he $.#. frozen dairy dessert industry continuously ma*es large investments in technologically-advanced manufacturing and pac*aging e.uipment, ena,ling the $nited #tates to ,e the largest and most efficient producer of ice cream and related products.

%he $.#. frozen dairy dessert industry is the world/s most efficient producer of ice cream and related products, with efficiencies improving annually. In the past ten years, the $.#. industry has practically dou,led its frozen dairy dessert output per plant. Continued investment and greater efficiencies will mean increased frozen dairy dessert production in the future. Top78uality raw materials $.#. ice creams are made with a careful selection of .uality ingredients. <anufacturers use only the highest .uality mil*, fresh cream, nonfat mil* solids, and whey protein concentrates, in the production of ice cream and related products. <any processors are committed to all-natural la,els and use only premium ingredients and flavorings to produce the finest .uality ice creams in the world. %he fat and sugar replacers that are used in the production of nonfat, nosugar-added and other healthy frozen desserts are all approved ,y the Food and 5rug Administration F5A!. #uppliers of inclusion ingredients, such as confectionery pieces, chips, fruit chun*s, variegates and nuts, use only the finest ingredients. Pro"uct "evelopment innovation %he $.#. frozen dairy dessert industry is glo,ally recognized for esta,lishing the industry as we *now it today. $.#. processors have em,raced ingredient technology, especially in the area of fat replacement, and produce the highest .uality, low-fat, nonfat and sugar-free frozen dairy desserts in the world. %he $nited #tates is also a world leader in ice cream novelty innovation. %echnical advancements in processing e.uipment ma*e it possi,le to manufacture any shape, size and flavor of novelty. %he $.#. mar*et is well positioned to manufacture products that meet the most current consumer trends. Creative pac9aging an" merchan"ising $.#. frozen dairy dessert manufacturers not only show off their creativity in the flavors of ice cream they produce, ,ut also in the pac*aging. %his includes inner protective seals on ,ul* pac*ages, as well as tamper-evident seals. %hese features are important in e7port mar*ets. Bul* pac*ages come round or s.uare, made from paper,oard or plastic, reseala,le or not. Cones, stic*s and sandwiches come in many sizes and shapes, in single or multi-pac* containers and ,o7ed or sleeved. In addition, upgraded paper, plastic and film carry ,older colors and more detailed graphics, stir up interest among consumers, and conse.uently increase frozen dairy dessert sales. <any manufacturers customdesign pac*ages for e7port mar*ets. Strict sanitary an" 8uality stan"ar"s %he $.#. frozen dairy dessert industry adheres to strict production practices, resulting in one of the safest, highest .uality ice cream and related product lines in the world. All products are tested and evaluated at every stage of production to ensure that they not only meet $.#. government standards, ,ut also the e7pectations of the consumer. #creening is in place to monitor product

composition and to detect any foreign o,0ects such as metal shavings. $.#. manufacturers employ strict warehouse, transportation and distri,ution guidelines, ensuring that only the highest .uality product reaches consumers/ freezers. %his includes maintaining steady product temperatures, sufficient circulation of refrigerated air and proper stoc* control and rotation using the firstin, first-out inventory management approach. Premium pro"ucts Air is whipped into the product resulting in overrun, an increase in volume. %he percentage overrun is carefully controlled to yield .uality products with optimum ,ody and te7ture. $.#. federal standards limit the amount of air ,y specifying that a liter of ice cream must weigh at least B.D+ *ilograms. $.#. ice creams typically do not contain over &BBO overrun. @egular to premium ice cream generally has ;B-&BBO overrun, super premium ice cream often has :B-DBO. # growing e:port7oriente" in"ustry >7ports of $.#. ice cream and related products have e7panded in the western hemisphere. In :BB+, $.#. frozen dairy dessert e7port volume reached ',(D: mt in <e7ico and :,D'B mt in the Cari,,ean, an increase of ')O and &'O respectively from :BBB. 3le:ibility in pro"uction Fith unrestrained capacity for growth, the largest mil* supply in the world, continued investments and an increasingly international focus on e7porting, the $.#. frozen dairy desserts industry can respond .uic*ly to mar*et demand and consumer trends. <any $.#. manufacturers also offer custom processing and pac*aging. Fle7i,ility in production and the a,ility to respond to customers/ needs, .uic*ly, are important features of $.#. e7porters. R Latest data availa,le: :BB&. $.#. 5airy >7port Council - :&B& Filson Blvd. #uite +BB - Arlington, AA :::B&)BC& $#A "hone $#A: (B).D:;.)B+' - Fa7 $#A: (B).D:;.)(BD Copyright S &''C-:BBC ,y $.#. 5airy >7port Council. All @ights @eserved.