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Eskimo Pie Corporation

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Mergers, Acquisitions, Restructurings, and Corporate Governance Eskimo Pie Corporation
Copyright © 1992 by the President and Fellows of Harvard College. Harvard Business School case 293-084.

In early 1991, Reynolds Metals, the makers of Aluminum Foil and other aluminum products, decided to sell its holding of Eskimo Pie, a marketer of branded frozen novelties. Reynolds had few interests outside its aluminum and packaging business, and the Eskimo Pie Corporation, with roughly $47 million in sales, accounted for less than 1% of Reynolds revenues. Reynolds planned to use the proceeds from the sale of Eskimo Pie to fund investments in its core aluminum business. Eskimo Pie was 84% owned by Reynolds Metals and 4% owned by the Reynolds …show more content…

If a licensee elected to use outside parties for certain ingredients and packaging, the licensee then paid Eskimo Pie a trademark license fee. Eskimo Pie also sublicensed the manufacture and distribution of frozen novelties under established brand names of other food companies. Sublicensing had been an important component of Eskimo Pie's strategy since 1975 when it developed the Nestle Crunch bar and sublicensed its manufacture and distribution. In 1986, shortly after it acquired Carnation, Nestle terminated the sublicensing arrangement. In 1991, Eskimo Pie licensed frozen novelties for Welch's and Leaf Incorporated, who owned the Heath brand name. Under the arrangements, Eskimo Pie had the exclusive authority to grant sublicenses for the manufacture and sale of these products similar to the way it did for its own Eskimo Pie brand products. Eskimo Pie purchased the base ingredients from the food companies and resold them, along with packaging, to sub licensees. Approximately 80% of the Eskimo Pie brand licensees were also licensees for Welch's and/or Heath products. Eskimo Pie provided centralized marketing for Eskimo Pie, Welch's, and Heath brand products. The majority of marketing expenses were spent on retail advertising and promotions; the balance went to regional consumer promotions using television and coupon campaigns. One or more of the company's Eskimo Pie brand products were found in 98% of all US grocery stores, and Eskimo Pie enjoyed one of the

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