Thursday, July 21, 2016
UNILEVER BUYS DOLLAR SHAVE CLUB
Unilever buys Dollar Shave Club. Another step by manufacturers into omnichannel. More pressure on retailers and on Procter & Gamble.
SAN FRANCISCO — It began with dinner in New York between Michael Dubin, the founder of the popular grooming start-up Dollar Shave Club, and a senior executive at the international consumer giant Unilever.
A little more than six months afterward, Dollar Shave Club — which was built on the idea of, well, inexpensive razors — has sold itself to Unilever for a rich price.
The all-cash sale of about $1 billion, announced Tuesday night, is a high point for digital commerce start-ups like Dollar Shave Club, which have gained popularity for coming up with new ways to sell consumer goods, largely without the overhead of brick-and-mortar stores.
Perhaps the most prominent star of the category has been Warby Parker, the hip maker of eyeglasses and sunglasses that has since branched out into physical retail stores as well.
“Dollar Shave Club is an innovative and disruptive male grooming brand with incredibly deep connections to its diverse and highly engaged consumers,” Kees Kruythoff, the president of Unilever’s North American operations, said in a statement. “In addition to its unique consumer and data insights, Dollar Shave Club is the category leader in its direct-to-consumer space.”
Mr. Dubin added in a telephone interview: “We have a mission, which is to help guys take care of themselves. Now we have access to one of the world’s most innovative consumer products companies.”
The transaction could presage more richly valued deals: The acquisition of Dollar Shave Club is one of the priciest sales ever of an e-commerce company, with a price tag that is five times its sales. Analysts speculated that Procter & Gamble, which owns Gillette, could make its own move for a competitor like Harry’s.
But as the direct-to-consumer model grew more popular and the market became inundated with subscription-based products, it became more difficult for some start-ups to continue raising money. Birchbox, a pioneer in the online subscription space, recently went through several rounds of layoffs, and has had troubles in its efforts to find funding.
“It was hard to raise capital for this company,” said David Pakman, a venture capitalist at Venrock Partners whose firm invested in several early Dollar Shave Club rounds. “Many leading firms passed multiple times.”
Mr. Pakman said the acquisition represented a “10x” return for his firm.
Other investors in the company include Science, Felicis Ventures, Comcast Ventures and Technology Crossover Ventures.
Dollar Shave Club itself gained attention soon after it was established in 2011, after the founder Michael Dubin’s guerrilla YouTube marketing campaign went viral for its schlocky, slapstick brand of humor. The company made a name for itself as a direct-to-consumer subscription razor blades service, which cut costs by eschewing traditional store-shelf space and passing on the savings to consumers.
As the brand grew, Dollar Shave Club expanded beyond razor blades, offering its own line of shaving cream and after-shave lotion, among other products.
Now Dollar Shave Club’s competition stretches beyond Gillette and Schick. Among its main competitors on the start-up side is Harry’s, which focuses more on the design of its razors but has also branched out into other grooming products. Harry’s — co-founded by Jeff Raider, a co-founder of Warby Parker, and backed by investors like Tiger Global and Thrive Capital — also owns its manufacturing, having bought a German razor factory two years ago. Harry’s last fund-raising round gave it a valuation of roughly $700 million, excluding that latest investment, and the company is likely to want a price of more than $1 billion.
And then there is Bevel, a razor seller that aims at the African-American market, which has drawn backing from the likes of Andreessen Horowitz.
Yet Dollar Shave Club is still on the fast track in terms of sales growth. In Tuesday’s deal announcement, Unilever said that the razor seller collected $152 million in sales last year, and was on pace to pull in more than $200 million in revenue this year.
The deal could prove particularly lucrative for Unilever, which among its various properties does not yet own a direct-to-consumer men’s shaving product line. The two sides first became acquainted about six months ago when Mr. Dubin sat down for dinner with Mr. Kruythoff, a meal arranged by a senior JPMorgan Chase banker, Noah Wintroub.
Over the meal, the two sides hit it off, and talks between Mr. Dubin and Mr. Kruythoff later progressed from Unilever potentially becoming an adviser to an investor to an outright acquirer. Important to both sides, however, was that Mr. Dubin remain chief executive.
Ultimately, Unilever presented a takeover offer around June 24, the day after Britons voted to leave the European Union.
“They made an offer, and we decided that it wasn’t a flight we wanted to miss,” Mr. Dubin said.
The deal is expected to close during the third quarter, pending regulatory approval. Fortune earlier reported the roughly $1 billion value for the deal.
JPMorgan advised Dollar Shave Club, while Centerview Partners advised Unilever.Continue