Reference no: EM132264569

The Right Mix

One February morning in 2011, Kim Starling sat staring with disbelief at the e-mail in her inbox. She and her friend Wendi Levinson had worked for eight years to develop a brand of hair products for mixed-race women called The Right Mix. Annual revenue had hit $5 million. Now, it seemed, everything was on the line. The e-mail was from a retailer informing Starling that Sally Beauty Supply, a Denton, Texas–based retail chain with more than 3,000 stores and revenue of $3 billion, had created its own line of products for mixed-race women—Silky Mix. The name wasn't the only thing familiar. The bottles were the same shape as The Right Mix's, and the packages' design used the same fonts and colors. Even the print ads had a similar composition. In fact, the only significant difference between the two companies' products was the price: Silky Mix's products retailed for about $8, compared with $14 and $20 for The Right Mix's. Starling and Levinson were furious. Their first impulse was to sue for trademark infringement. But were they really prepared to get into a legal battle with a multibillion-dollar giant? Was there another way to protect the brand they had worked so hard to build?

1. The backstory:

A new product—and a new market. Hair has long been a topic of conversation between Levinson and Starling. Both women are of mixed race, and both have constantly struggled to tame their unruly curls. They would vent about the way beauty products catered to people's ethnicity—not the actual texture of their hair. "When you are multicultural, you have a blend of hair," says Starling. But no products acknowledged that fact. In 2003, they decided to stop griping and start doing. They brought a box of their favorite products to a chemist, who helped them create a leave-in conditioner designed to work specifically with their type of hair. A year later, they launched The Right Mix, now based in Canoga Park, California. Soon their products, which included shampoo and conditioner, were selling in salons and beauty-supply stores nationwide. In 2009, Halle Berry endorsed the brand, listing its wares as "must-have products" in three national beauty magazines. That year, the two women were working The Right Mix booth at a trade show when a rep from Sally Beauty Supply came by. According to Starling, the woman said she liked their idea and suggested that they talk further. The two co-founders were thrilled. A few months later, a Sally Beauty rep called to talk about stocking The Right Mix's products. It was an enticing opportunity. But after learning about some of the chain's strict return policies—one provision allowed Sally Beauty to discount The Right Mix's products by any amount at any time—Starling and Levinson declined.

2. The problem:

"A generic version of The Right Mix"

About an hour after Starling learned about Silky Mix, another retailer called with a similar report. Starling and Levinson immediately dispatched employees to buy the products. Starling tested them that night and was unimpressed. Later, she visited a Sally Beauty store and found Silky Mix prominently displayed on the checkout counter. When she asked about it, a clerk told her it was "a generic version of The Right Mix" and "virtually the same thing." Soon, more retail clients were reporting that customers were balking at buying The Right Mix, saying that Silky Mix cost a lot less.

3. The options:

To sue, or not to sue?

The two women mulled the problem for about a month. They researched what business owners in similar situations had done and consulted with a handful of attorneys. They considered sending a cease-and-desist letter, demanding that the chain immediately stop making Silky Mix. The problem with that approach: If a court ruled against The Right Mix, the two women could be forced to compensate Sally Beauty for any lost revenue. On the other hand, if Starling and Levinson filed a lawsuit and won, they might be able to get Silky Mix off the shelves—and collect damages for lost sales and a tarnished reputation caused by customer confusion with what Levinson and Starling considered inferior products. But suing could cost $250,000 to $500,000 a year in legal fees—and the case, lawyers warned, could drag on for years. It would also be a major distraction for the women, who had plenty of work to do managing their growing business. On the other hand, if they did nothing, the outcome could be even worse. Could they live with themselves if they did not stand up for themselves?

Your decision:

1) What other options exist for the owners of The Right Mix?

2) What would you do and why?