Creating a brand can seduce you with its need for bottomless creativity as can the hope for a secure financial future. The emotional investment necessary to create something bigger than yourself can leave you with little time for anything other than invention, marketing, and growth. In the end, you may have products, a company, and global sales, but often, the story doesn’t play to such a finely-tuned melody. For Mike Romley, ingenuity, passion, and experience are woven throughout his company, Red Cup Living. But for all the hours of effort and his previous experiences scaling companies, the difference between a successful exit and retaining a beloved company came down to one factor, timing.
Turn back the clock to when Mike Romley and his wife purchased a new home and immediately added a beautiful brick patio to enjoy the evening Phoenix sun. As all good gatherings happen, neighbors began gravitating to the Romley’s evening respite, meeting neighbors for the first time that they had lived by for years. “We thought there’s really something cool about having red cups and bringing people together, creating community.” But after working all week and partying Friday evenings, the Saturday morning clean-up also became a regular routine. “I became really tired of throwing away the single-use plastic cups every Saturday morning. We woke up one morning and said, there has to be a reusable and dishwasher safe party cup out there. There wasn’t… and we realized we had to bring them to market.” With this spark, a company was created in 2011, and Mike and his wife embarked on the adventure of creating their lifestyle brand, Red Cup Living.
Very soon after, product ideas were flowing, written down, and designed. In a previous business Mike co-founded, he developed and marketed kitchenware items worldwide. Knowing that he wanted to expand quickly with multiple SKUs, he decided to pursue overseas manufacturing as the tooling costs in the US were too significant for the new company. In designing and planning the iconic party accessories, he tapped into an established network of manufacturers in Taiwan. “I wanted to go back and work with [the Taiwan manufacturer]. I believe you get a higher quality product in Taiwan… And, most importantly, Taiwan is an ally of the U.S.. whereas China is more of a competitor.” Due to his previous working relationships, Mike did not find working with an overseas manufacturer to be particularly challenging, but quality control and a superior product were more elusive. “There were several different iterations of prototypes before we nailed it… The challenge was being extremely particular about putting out a world class product, getting it right the first time.” And they did. The cup were sturdy, ready for the dishwasher, and instantly recognizable as a party favorite.
Scaling the business was an intense undertaking that brought long work days as well as many sleepless nights. Hiring as fast a possible, the company stretched to keep up with demand. After creating additional molds to produce at twice the previous capacity, all forecasts pointed to a manageable growth trajectory. That is, until county music favorite, Toby Keith released his party anthem, Red Solo Cup, celebrating the iconic party staple. At the release, sales forecasts went from respectable gains to skyrocketing sales. “We created the market and the product category and then the song hit. [The song] significantly helped bring attention…, so at some point the products became trend driven.” The trend expanded the category and with it, competition and knock-off products.
Despite the creative spirit and resourcefulness with which Red Cup Living developed their brand, the offshore manufacturing behemoths created inferior products at a fraction of the price, diluting the retail space allotted to this new company. Though this company demonstrated forward-thinking by earning 17 design patents, the original red cup itself was not patentable, leaving room for competitors to undercut the premium product. “We got knocked off by very large, significant factories. In addition, [retailers] came out and imported their own cup at a faction of the cost of ours. [Though the quality was not as high], it was still a red cup and it competed. We virtually lost half of our retail customers in a period of months.” Battling large retailers or manufacturers on patent infringement can be costly and smaller companies are often unable to pursue lengthy and costly legal battles. “It’s very time consuming and expensive and we didn’t have the resources. Plus, I’d much rather play offense, than playing defense. At some point it does not make sense to fight the infringers.”
"We created the market and the product category and then the song hit. It significantly helped bring attention, so at some point the products become trend driven."
At their peak, Red Cup Living was valued between four and seven million dollars, with an even higher valuation only impacted by their short operating history. They were sought after for acquisition and licensing, but Romley had faith in his vision of building a lifestyle brand. They created additional products around their red cup to generate growth, expending capital as well as acquiring and storing costly inventory. “We just knew we wanted to scale the company and you can’t scale significantly with only a handful of proucts. Over the eight years we’ve had the business, we grew into thirty-nine different SKUs.” Rather than focusing on their core items at this turning point, they pushed ahead. Regardless of their palpable passion for Red Cup Living, sales began to fall, and the trendy song-inspired enthusiasm went the way of all trends, on to something new.
Reflecting on his company’s exponential growth and eventual slowing of sales, he has reckoned with the results and maintains a solid perspective on what happened. It, “was too much growth, too fast, and not all of the products were well received in the market.” The combination of declining sales and a lack of enthusiasm in the market for the wide-ranging product line impacted his ability to sell his company. “The fact that my business did not sell is more a reflection of the declining revenues, but even with that, I was exposed to a lot of qualified buyers [at The Firm] and it was a good process.” Receiving feedback from potential buyers has given the Romleys the opportunity to truly ruminate on their journey with Red Cup Living. Emphasizing that you cannot build a long-term business based upon trends, he encourages other business owners to constantly consider their options to sell or retain their company. His advice, “Remove your emotional attachment to the business and take the four to seven million upfront and then go build it again.” Aside from a missed financial opportunity, this entrepreneur has gained an invaluable amount of life experience, knowledge, and advice to share with others. “There is an old adage in business, that the first money offered is always the best money. There’s some truth to that. But the main thing, is that I believe that every business is for sale every day and you have to run it that way… Always be prepared, so when you do get that call, you are ready to have a conversation.”
And to all those entrepreneurs with a great idea, Mike says, “Go for it! A lot of people have ideas and they never execute and always wonder what if.” In the end, rather than turning inward, closing up shop, and decrying the mis-steps, Red Cup Living is still thriving and creating an undeniable party atmosphere on blocks across this country. “We have cleaned up our product line and are down to 15 core items and all sell very, very well. Due to the war on single-use plastics, we are again seeing renewed interest in our brand and products. Currently, many corporations, cities, and states are legislating against single use plastics. I believe our future is bright and Red Cup Living’s reusable and dishwasher safe partyware is perfectly suited to capitalize on this market dynamic.” So, if you’re celebrating with your friends and family and you see a red cup held in someone’s hand, may it be a reminder that passion, vision, and determination are key to creating a timeless American brand, but timing is everything.
