If a Recode report published Friday is true, Jessica Alba's Honest Company is considering selling itself to a consumer product giant. Recode speculates the suitor could be Unilever or Procter & Gamble. Honest declined to comment on the story.
The fact that Honest might be flirting with such potential acquirers shouldn't be terribly surprising.
In recent months, consumer product e-commerce companies racked up two big deals--Unilever's $1 billion acquisition of Dollar Shave Club and Walmart's $3.3 billion deal to buy e-commerce retailer Jet.com. That's quite a turn of events if you consider previous e-commerce deals whose figures were nowhere near the billion-dollar mark: Saks Fifth Avenue acquired Gilt Groupe in January for $250 million and Bed Bath & Beyond purchased One Kings Lane in June for an undisclosed amount that the retail chain described as "not material."
It's possible Honest is the next target that could fetch billions--the company reportedly brought in $300 million in sales last year and has a reported valuation of $1.7 billion. But that doesn't mean it should do a deal.
The real question is, is the Jessica Alba brand more valuable as a standalone company or as an acquisition target?
As Bloomberg points out in its smart analysis of the Dollar Shave Club-Unilever deal, the razor company's biggest asset was its strong, authentic brand. CEO and founder Michael Dubin built a company that spoke directly to its male customers with humor and frankness. Even if you weren't put out before about having to pay a higher price for blades that require store permission to release from their locked retailer boxes, you probably were after you watched one of Dollar Shave's funny homegrown advertising spots. Tongue-in-cheek touches like the bathroom newsletters only add to the appeal. The fact that you can subscribe to a razor plan certainly offers convenience, but you can get that through Gillette now too.
But the cleverness and humor that helped the razor startup take off are arguably difficult to sustain and may fade over time. Plus, it's easy to copy core elements of the business. (Gillette in fact named its subscription plan Gillette Shave Club and is basically trying to win on price.)
The Honest Company, by contrast, has a brand that is difficult to replicate. To state the obvious, it's tough to clone its famous founder and the goodwill and personal connection she has built up with fans who admire her all-natural lifestyle. With an ever-expanding line of personal-care and home products, she has a compelling pitch: her lifestyle is attainable for the every-woman.
It's true that Honest has taken some knocks over the past year from various lawsuits arguing that the company's products use chemicals, such as sodium lauryl sulfate, that Honest promised not to use. (The company has called these suits "baseless.")
The allegations generated a fair amount of negative press at the time but they don't seem to have slowed the company's growth or, presumably, its consumer appeal. Honest subsequently launched feminine care, and a full cosmetics line and haircare line to rave reviews in the beauty press. The brand has expanded its retail footprint through a nationwide Ulta partnership and its own temporary pop-up store in Los Angeles, with New York locations a future target. When Honest wants to introduce a new product to the market, morning tv shows and celebrity publications are all too happy to cover each announcement in detail. In its five years, Honest has shown a resilience not easily matched in consumer products.
The IPO waters may not be quite right at the moment. It's an election year, we're now in the fourth quarter, and it's possible the company wants to put a little more distance between the lawsuits and any plans to go public, just for good measure.
But if the company has profitability (or is on the road to get there soon), the strength of the brand offers a pretty compelling argument for the company to wait it out.
"We believe that ultimately this could be a great public story where so many in our community could be shareholders as well," Lee told me back in 2014 at Inc.'s GrowCo conference. "As an entrepreneur, if you're going to start something, if you're going to put in the effort, dream big."
A public Honest Company may very well be worth the effort.