Small business lessons from The Caker and Chrissy Teigen debacle

If a bigger business fish decides to make lunch of a small fry’s idea, is there anything the minnow can do to right the wrongs?

That’s the question Jordan Rondel, founder of Auckland-based innovative cake mix company The Caker, hopes she won’t need to answer after a recent run-in with Instagram star Chrissy Teigan.

Last month, in the wake of a supposedly amiable “collaboration” project between the two, Rondel awoke one morning to see Teigan’s company Cravings had released a line of cake mixes sporting a packaging design and colouring that looked remarkably, indeed suspiciously, similar.

Rondel said in an interview with Rolling Stone that she was not interested in personally “calling out” Teigan for the copying, suggesting instead that the Cravings team was behind the decision.

“The bigger story here is less about what Cravings or Chrissy Teigen might have done to The Caker, it’s more about how the ‘Big Guy’ can stomp on the small guy so easily and walk away with more rewards than the small guy did in the beginning,” Rondel said.

Rondel is correct to point this out. The press is full of stories of large companies “stealing” ideas from smaller players, intimidating them with threats of legal action and using their muscle to grab market share, eventually forcing the smaller player out.

It’s a nasty world out there, as Rondel is discovering.

This story has a bunch of lessons for small companies planning to take on big players. The secret is to develop strong intangible assets, something it appears Rondel regrettably didn’t do.

The biggest complaint by Rondel is that Teigan’s line of products has copied the look and feel of The Caker’s product or, in legal speak, its “trade dress.”

Trade dress refers to the summary characteristics of the visual appearance of a product or its packaging that signify the source or maker to consumers (overall commercial image) of something.

It’s going to be tough to prove that The Caker owns the way its product appears. Proving this would involve looking at The Caker’s sales or another metric to provide evidence of the product’s popularity in the marketplace. If Rondel can’t prove her brand is well-known then it will be hard to make this claim.

So, if The Caker had a stronger brand – if it had focused on building this intangible asset – then Teigan’s company Cravings might have thought twice about copying Rondel’s design and packaging. In addition, a strong brand creates “sticky” customers that are unlikely to be swayed by a me-too product suddenly landing on the shelves. The Caker hasn’t yet built a well-recognised brand, which has encouraged rivals like Teigan to field their own knockoffs.

Leaving the issue of brand behind for a moment, would The Caker have been safer if it had protected its recipe? Unfortunately, this is a non-starter. Protecting a recipe is frustratingly difficult for FMCG companies because food safety regulations require consumable products to list the ingredients on the back of the packaging. This level of transparency makes it easy (ish) to reverse-engineer cake recipes.

Also, hundreds of variations of similar cake recipes are already available online and who is to say Rondel’s recipe was sufficiently superior to extract a premium for something anyone can get for free? Further, no court is likely to support the idea that a company can hold a monopoly over doing something that the general public can do in their free time.

But despite these dead-ends, The Caker did have ways to wrap its products in other intangible assets to reinforce its market position and dissuade Teigan’s outfit from copying the product. For example, The Caker could have:

• Filed multiple trade mark registrations for distinctive portions of the product (such as the stylised text, colour, brand name in the form of word or stylised device marks);
• Outlined the exact copyright on the packaging with the creation date listed (this is an automatic right in New Zealand);
• Sought a design registration for pattern and ornament as applied to the packaging (however, it is unclear if this would be successful).

At a practical level, enforcing such rights can be challenging and expensive. But even having a pending design or trade mark registration on a public register can act as a significant deterrent to a would-be infringer sniffing around.

Yet, Rondel’s best strategy wouldn’t require a lawyer at all.

In the early days of the company, she would have been best advised to rapidly build distribution, robust customer and supplier relationships, an effective supply chain and, most importantly, a strong brand. These powerful intangible assets are significant barriers to entry that can dissuade much larger competitors. No doubt Rondel would say, “that’s exactly what I was trying to do!”

Nevertheless, Rondel’s unfair situation is a useful warning for aspiring entrepreneurs. It is simply a fact that some sectors require considerable time and money to build strong intangible assets like the above. Until this is achieved, young companies are highly vulnerable to copycats. Indeed, it’s almost impossible to compete in the FMCG sector without strong intangible assets. Business owners should figure out what assets they have before they begin on their journey, not after.

But, despite the drama, it appears Rondel is staying positive about the situation and sees the potential marketing opportunities that could come from a public dust-up with a major international celebrity.

“I’m trying to look on the bright side and see [Cravings] as a healthy competition; maybe the elevated cake mix market needs a bit more attention. Maybe, in the long run, it will help us,” Rondel told Rolling Stone.

We hope she’s right.

As originally published in the New Zealand Herald