Redken Laboratories Inc.

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Redken Laboratories Inc.

575 5th Avenue
New York, New York 10017
U.S.A.
Telephone: (212) 818-1500
Toll Free: (800) 423-5369
Fax: (212) 984-4999
Web site: http://www.redken.com

Wholly Owned Subsidiary of L'Oréal S.A.
Founded: 1960
Employees: 400
Sales: Not Available
NAIC: 325620 Toilet Preparation Manufacturing

Redken Laboratories Inc. is a New York City-based subsidiary of France's L'Oréal S.A., the world's largest beauty products company. Redken serves the beauty salon market with hair care, color, texture, and styling products. Since 2004 the company also has offered men's hair care, styling, color, and skin products. Redken is known for its investment in research and development, credited with a number of innovations over the years, including the concept of protein reconditioning. It also has made a long-term commitment to education, teaching stylists both the scientific basis for Redken products and the way to use them aesthetically. The company's main training outlet is the Redken Exchange, located at 5th Avenue and 46th Street in the heart of Manhattan, a state-of-the-art facility where salon professionals are able to attend seminars and receive hands-on training. Redken also conducts seminars elsewhere and makes educational resources available online.

BIRTH OF THE WOMAN BEHIND REDKEN IN 1931

The woman behind the idea for Redken was Paula Kent. Born in West Los Angeles, California, in 1931, she grew up in Burbank, where her father worked as an accountant for the Fox Film Corporation. A high school dropout, Kent had aspirations of becoming an actress. In the 1950s she auditioned for television commercials and acting roles, requiring that she often change her hairstyle, but she developed a strong allergic reaction to some of the chemicals used in hair sprays. Because the government did not yet require that the ingredients be listed on the canister, she had no idea what was causing the irritation to her scalp. She turned to someone who might know, the husband of a friend, beauty salon owner Jheri Redding, who had launched his own company to produce hair care products.

Redding was born Robert William Redding in 1907 on an Illinois farm. As a young man during the Great Depression of the 1930s he saw little opportunity working as a farmer but noticed that hairdressers seemed to be doing quite well. Thus he became one of the first licensed cosmetologists in Illinois. Something of a frustrated chemist, he was soon playing with chemicals to develop his own shampoos and rinses. He also looked for a distinctive name to help market himself, eventually coining the name Jheri. He moved to Los Angeles after World War II, opened a salon, and taught hairstyling. In 1956 he launched the Jheri Redding Products Company to market to salons a cream rinse he developed. The product was the result of his assumption that hair was made of protein, a fact not yet established, and that damaged hair could be reconstructed and repaired through the use of protein in a rinse. Redding had partners who took care of marketing and distribution but by the end of the 1950s they grew apart and he was receptive to forming a new company with Kent to develop hair care products that were less irritating to the skin.

The 29-year-old Kent, whose acting career peaked when she played a hat check girl on the television series 77 Sunset Strip, was ready for a career change. With $3,800 she received from work on a Hamms Beer television commercial, she invested with Redding to form Redken Laboratories Inc. in 1960. The Redken name came from "red" for Redding and "Ken" for Kent. The company took what it said was a scientific approach to creating beauty products, starting with the belief that hair was primarily composed of protein. Furthermore, they believed hair was acidic in its chemistry and keeping it from becoming alkaline prevented damage. Redken would also list the ingredients contained in the products it sold. The company's marketing approach was to sell to salons and to provide special training programs to teach stylists about the products.

Kent put her training as an actress to good use in educating salon owners and stylists, and Redding had the knack of a medicine show man in promoting the products. Robert Oppenheim, a former executive with Clairol and Revlon, told the New York Times that whether shampoo was a little on the acid side or alkaline side made no difference from a chemical point of view, but "the point was that Jheri Redding thought it was and he sold that and it sold his products. The salon owners all loved him. He would hold up litmus paper and dip it into his product and it would come up golden," indicating mild acidity, "and then he would put the litmus paper in a grocery store shampoo and it would come up black. What difference did it make if it had no meaning? It was a great demonstration with a lot of seemingly scientific babble and it was something that a hairdresser without a chemist's training could talk about to customers."

PARTNER BUYOUT IN 1965

In the first year, Redken posted sales of $90,000 from its line of three products, which included the first Phbalanced hair care products. The second year sales increased to $350,000. Kent bought out Redding in 1965 and a year later sales reached $1.5 million. Under terms of the sales agreement, Redding was unable to participate in the hair care field for a period of time and so he formed Jhirmack Enterprises to sell vitamins and food supplements. In 1976 he returned to selling shampoos and conditioners through his company, which he sold in 1979. A year later he was once again providing competition to Redken and his former partner when he formed Nexxus Products (short for "nature and earth united with science"), using fruits, herbs, plants, and other organic ingredients in making hair care products. He remained active with Nexxus until 1991, and he died in 1998 at the age of 91.

Kent proved an adept businesswoman and steadily grew Redken. In the second half of the 1960s she brought London stylist Vidal Sassoon to Los Angeles to demonstrate at a trade show the "bob" look he had developed and was about to make famous with Mia Farrow in the film Rosemary's Baby. The company was still relatively small by the start of the 1970s but Kent was ready to take Redken to the next level. Kent had been relying on bank loans to expand the operation and keep up with demand, but in 1971 she decided to tap the public markets, raising $5 million from an initial public offering of stock underwritten by the Los Angeles firm of Mitchum Jones & Templeton. Secondary offerings were later handled by Merrill Lynch. The year 1971 was also noteworthy because Kent remarried, wedding John Meehan, an advertising executive for trade magazines, including publications that covered the fashion and hair care fields. They met when he paid a business call to Redken. She took his last name, becoming Paula Kent Meehan, and he brought his experience to bear in helping her grow the company. He became chief executive officer while she served as chairman of the board.

COMPANY PERSPECTIVES

Redken balances its solid past of science with inspiration from the industry's best educators and a street sense of fashion that keeps Redken on the cutting-edge.

Redken enjoyed strong growth in the 1970s, spurred by a growing retail business, as the company sold its products to customers through salons, which in addition to receiving training on the products learned from Redken reps how to market them. The idea of selling to salon customers was perhaps as revolutionary as the Redken products themselves, but in truth it was an organic development that Redken was quick to exploit. "Salons began to realize that it was crazy not to sell a woman a shampoo. She was going to buy it someplace," Kent told Forbes in a 1984 interview. Learning that salons were repackaging Redken products to sell to customers, the company stepped in, not to stop the practice, but to encourage it and help salons do a better job at retailing. Because stylists had customers in a chair for a long period, the company insisted that this was a perfect opportunity to sell them on the Redken salon products, which they could pitch as a way for customers to maintain the look they achieved in the shop. Moreover, if a hairdresser failed to make a recommendation, they were letting a major source of revenue walk out the door. The Redken shampoos and conditioners included a steep markup, making them highly profitable to both Redken and the salons, who were more than happy to partner with the company on retailing.

Revenues reached $11 million in fiscal 1972 and increased to more than $42 million in fiscal 1976. Almost half of the sales came from shampoos, conditioners, and wavesets; 16 percent from hair sprays and permanents; and 8 percent from hair colorings. The remaining quarter came from the sale of miscellaneous skin care and beauty products, such as lotions, creams, makeup, cleansing bars, and masques. With plenty of cash on hand, Redken was able to move out of its cramped quarters, a 20,000-square-foot building in Van Nuys, California, as well as ten other separate facilities, and set up corporate offices, manufacturing, and a research lab at a new 240,000-square-foot facility in Canoga Park, California.

Redken continued to make a commitment to research and development, annually spending $1 million to $2 million, resulting in the introduction of several new products each year. In 1979 the company even tried its hand at fragrances, offering a product called Pique, available in cologne, perfume, or purse spray versions. Still the company's growth depended on its core shampoo and conditioner business. Sales reached $65 million in 1979 when its customer list totaled 13,300 salons in the United States. The company also was looking overseas, especially to Japan, the second largest hair care market in the world. By 1983 the company was generating about $13 million in international sales. Unfortunately, Japan proved to be a difficult market in which to make much of a profit.

Only selling to salons—a practice that gave a sense of exclusivity to the Redken products and allowed for a high markup—remained a key to the company's success. It required diligence and the policing of Redken distributors to make sure they did not allow products to slip through back channels and onto the shelves of drugstores, supermarkets, and beauty supply stores. By the early 1980s agreements with 14 distributors had been terminated because of violations to Redken's salon-only policy.

The Meehans took a step back from the management of the company in the early 1980s, hiring Simon Mester, the former head of the Helen Curtis and Max Factor Japanese units. He became Redken's president, while John Meehan became chairman and Paula Kent Meehan assumed the title of "founder-chairman." When business fell off Mester was forced out in July 1986 and the Meehans resumed more active control. Sales reached the $120 million mark by 1988, but by this time the Meehans were not happy with being a public company and decided to take the business private. Aside from an aversion to shareholder pressure to achieve short-term increases in sales and profits, they believed that their competitors were taking advantage of Redken's public status, buying single shares of stock in order to gain access to financial information. They came to believe, according to the New York Times, that some of their competitors misused that information to discredit the company during the 1986 downturn. A leveraged buyout plan was engineered by Merrill Lynch, and in September 1988 the Meehans bought back the company stock at $35.44 a share. It was financed by a $58 million loan backed by the Meehans.

SELLING THE COMPANY IN 1993

Private once again and firmly in the hands of its founder and her husband, Redken resumed its pattern of strong growth. Within five years the loan was paid off and by 1993 sales reached $165 million. Over the years many major companies had offered to buy Redken, but only now did the Meehans decide that the time was right to sell the business. In 1993 they sold Redken to Cosmair, Inc., L'Oréal's U.S. licensee.

KEY DATES

1960:: The company is founded by Paula Kent and Jheri Redding.
1965:: Kent buys out Redding.
1971:: Redken is taken public.
1988:: The company is taken private.
1993:: L'Oréal buys Redken.
2004:: Redken for Men is introduced.

Cosmair quickly decided to move Redken's manufacturing and distribution operations to a newer plant in Florence, Kentucky. As part of the sales agreement, the company's headquarters were to remain in Canoga Park. Several months later, in January 1994, an earthquake struck the area, causing extensive damage to the facility, and Redken headquarters were relocated to New York City, the heart of the beauty and fashion industries. Paula Kent Meehan remained involved with the company she launched, but in an unofficial capacity, essentially as a goodwill ambassador. In addition, she established an investment firm, Kenquest, and was involved in a number of business and charitable activities.

Little changed for Redken as a L'Oréal subsidiary. It continued to focus on the salon market, in which Cosmair had done little business. To protect the brand, the company continued to crack down on the diversion of its products. Nevertheless, the brand lost some of its luster in the mid-1990s, which hurt retail sales. Professional recommendations were important, but then so too was brand awareness. In an effort to rebuild the brand, the company in 1998 ran its first television spots in a decade. Having the global marketing muscle of L'Oréal also helped in the effort to make Redken relevant as the new century dawned. No longer did people buy Redken products simply because of the "professional" label. Redken, in order to compete, made a recommitment to education and the leveraging of new technology to partner with distributors and salons and help them build their businesses. In 2000, for example, the company made monthly CD-ROM presentations available to its field reps and educators.

Redken also invested in research and development to bring out new products, especially new color products, which became increasingly more important as the U.S. baby boom population turned gray. Moreover, Redken developed a line of products for men, who were more open to buying salon-quality products. Redken for Men, unveiled in 2004, included 15 hair care products: three shampoos, a conditioner, a cleansing bar, and six professional color shades.

To remain current, Redken redesigned its packaging in 2004. The new packaging assumed a sleek, minimalist look, centered around the New York skyline. It introduced the Redken Color Bar concept, a unit where customers could consult with trained Redken colorists to pick out hair colors and then watch them mixed for application. The Color Bar was especially popular with younger customers. It also represented a commitment to innovation that has been a hallmark since the company's founding in 1960 and would likely remain the key to its future growth.

Ed Dinger