The Honest Company, the startup co-founded by actress Jessica Alba in 2011, is in talks to become acquired by another firm, according to Recode. That firm could be a larger consumer products company, such as Procter & Gamble or Unilever, sources said.
It is estimated that the fast-growing consumer goods company will bring in some $250 million in revenue this year through sales of its nontoxic personal-care products, including diapers, sunscreen, and baby formula. It was previously said to be considering an IPO this spring, though it later scrapped those plans for fear of an unreceptive public market, according to Recode.
The Honest Company had set itself apart from the competition by promising not to use health-compromising chemicals in its products. Still, the startup has come under fire as of late, with several lawsuits claiming that some of the products contain chemicals it promised not to use, such as sodium lauryl sulfate (SLS). The Honest Company has called these suits "baseless."
So far, the five-year-old company has raised $222 million, and is valued at an impressive $1.7 billion. It wouldn't be the first consumer products firm to sell to a larger company, as traditional retailers recognize the growing importance of e-commerce. Earlier this summer, Dollar Shave Club, the subscription-based retailer of men's grooming products, was sold to Unilever for $1 billion.
A majority of the Honest Company's sales come through its own websites, which would be attractive to a potential acquirer. And like those of Dollar Shave Club, its customers can subscribe for monthly deliveries of bundled products, which make up some 80 percent of its e-commerce sales, according to co-founder and CEO Brian Lee.
"The bundles work really well for us, and subscriptions represent a pretty large portion of our revenues," Lee told Inc.'s Lindsay Blakely in an on-stage interview last year. "It's extremely helpful for predictability and forecasting of inventory."