WWD.com/business-news/legal/bare-escentuals-battles-diversion-to-mass-market-462467/
government-trade
government-trade

Bare Escentuals Battles Diversion to Mass Market

Bare Escentuals products have popped up at Target and Costco, two retailers that the mineral makeup company charges are unauthorized...

One of Bare Escentuals' latest product lines, RareMinerals night treatment.

Bare Escentuals products have popped up at Target and Costco, two retailers that the mineral makeup company charges are unauthorized to sell its premium-priced wares.

During a quarterly earnings call with analysts on Feb. 26, Bare Escentuals Inc.’s chief executive officer Leslie Blodgett declared, “While we are pleased that we continue to make our products more accessible to our customers, with that increased distribution scale, unfortunately, comes the possibility that our products make their way to unauthorized sales channels.” She continued, “Indeed, we have seen unauthorized Bare Escentuals products appear in Costco [Wholesale Corp.] and Target [Corp.] stores. To be clear, Bare Escentuals does not have a business relationship with either retailer and as such, we are aggressively pursuing our legal rights with respect to sale of Bare Escentuals products through unauthorized channels. At the same time, we are taking proactive steps to develop methods to better track our products through the supply chain and prevent future occurrences.”

Bare Escentuals declined to comment further, said a company spokeswoman, due to ongoing litigation.

Last year, Bare Escentuals filed a lawsuit against Costco for alleged trademark infringement and unfair competition. The lawsuit — filed in federal court in California on Jan. 12, 2007 — states that Costco has sold products, naming the Starter Kit in particular, bearing the company’s Bare Escentuals and Bare Minerals trademarks, and distributed printed materials and packaging, which Bare Escentuals did not furnish or authorize. The lawsuit also cites Costco’s refusal to disclose the source of the products. According to court filings, mandatory settlement meetings are slated for June. Costco could not be reach for comment by press time.

Bare Escentuals is attempting to settle the matter with Target’s management before pursuing legal action, according to an industry source briefed on the situation. As of Thursday, Target was still selling Bare Escentuals’ Beyond Basics kit for $49.99 on its Web site.

In November, one of Target’s vendors spotted Bare Escentuals products in the mass retailer’s mock-up display. That same month, Bare Escentuals merchandise also was found in Costco doors, as well. The executive explained that Costco’s product programs generally run from one to three months.

Bare Escentuals’ authorized retailers are Ulta, Sephora, J.C. Penney via in-store Sephora boutiques, QVC and Nordstrom and Macy’s, where the company is found in select doors. Ulta underscored the prominent role that Bare Escentuals plays in its assortment — the company’s kits are often placed near the retailer’s entrance — by issuing the following statement: “Bare Escentuals is a strong and valued partner.”

Bare Escentuals also sells its products in its company-owned boutiques and via infomercials. By the end of 2008, the company plans to expand its domestic distribution by about 40 percent to 780 doors. Additionally, Bare Escentuals is testing its wares in four U.K. department stores.

Bare Escentuals’ success with mineral makeup has prompted a host of mass market brands to follow suit. Over the last several years, Neutrogena, L’Oréal Paris, Cover Girl, Maybelline, Almay and Revlon have entered the mix, broadening the mineral trend in the mass market carved out by Physicians Formula.