Advanced Corporate Finance
Professor Manuela Athayde Marques
TA Professor Ana Carolina Mota
Eskimo Pie was a well known brand of frozen novelties in the early 1990’s. As
many companies in its stage, Eskimo Pie decided to explore growth opportunities by
The aim of this report is to present Eskimo Pie’s business and its historical
background in the first and second sections. The third and forth sections illustrate a
historical and financial analysis of the frozen novelty industry. The last section refers to
the different alternatives that Eskimo Pie has to go public.
Innovative ideas can start with day-to-day ...view middle of the document...
In addition to the two main lines of business - licensing and manufacturing Eskimo Pie emphasized product innovation.
The licensing approach arose from the lack of centralized refrigeration. Eskimo
Pie licensed to 2,700 manufacturers by the spring of 1922. Within these licenses,
manufacture, distribution and sale were channeled through a network of 20 diary
product manufacturers. However, Eskimo Pie kept control of quality standards through
strict conditions including the right of inspections on manufacture and handling of its
products. When using Eskimo Pie product, licensees would pay for the ingredients and
packaging, however, they would be charged a trademark license fee when choosing
The licensing activities made up a major part of revenues. In fact, 75% of
revenues were realized through the top 10 licensees. In Exhibit 1 are reported the
sales breakdown of the business lines between 1989 and 1991. As one can see, Eskimo
Pie’s licensing sales remained constant at a level of approximately 60%. Welch’s and
Health sublicensing sales grew from 14% in 1989 to 24% in 1991 and Flavor, Packaging
and other sales decreased from 28% to 20%.
Alongside with the licensing of the Eskimo brand, the company sublicensed
frozen novelties under the name of other companies such as Nestlé for a period of
time. The brand licensees for products from Welch’s and Leaf Incorporated accounted
for approximately 80%.The centralized marketing that the company provided both to
its own product but also for Welch’s and Leaf allowed the high recognition of the
brand and its presence on 98% of all U.S. grocery stores.
Year Ended December 31
Welch’s and Health
Flavors, packaging and
Eskimo Pie manufacture operations were done through three plants in the
United States with 46 hourly workers and 18 salaried employees. The company would
produce ingredients and packaging for its licensees and non-licensees.
As a first mover in the industry, Eskimo Pie operations were centered around
innovation and product development. The sugar freedom Eskimo Pie innovation had a
direct impact on market share increased by 3% from 1987 to 1991. The corporation
was the first to introduce the fat-free concept in the industry; moreover, it even
started developing a fat-free line by 1992.
During the 1980’s, the frozen novelty industry was characterized by a structure
of low growth, little advertising, and few participants. Big companies such as General
Foods, Mars and Coca Cola entered the frozen novelty industry, transforming it into a
rapidly growing market. In 1980, the number of ice cream novelty brands was around
100, and in 1987, the number of ice cream novelty brands was already expanded over
500. The units sold increased from around 450...