The Honest Company, the consumer products startup that has largely operated in the limelight thanks to its famous cofounder, actress Jessica Alba, is talking with larger, more traditional consumer packaged goods outfits that are interested in purchasing the company, confirms a source close to the company.
Recode wrote yesterday that the company was engaged in acquisition discussions that may or may not result in a sale. Honest Company, founded five years ago in L.A., was reportedly valued at $1.7 billion when it raised $100 million in financing last year. Altogether, it has raised $222 million from investors and, according to Recode, it generated revenue of $300 million last year. (A three-month-old Bloomberg report said its sales last year were $275 million.)
A source tells us that the vast majority of the Honest Company’s revenue is being generated via the company’s sites, but that it’s currently seeing its fastest growth by selling wholesale through more than 6,000 stores, including Target, Whole Foods, Costco and, until recently, through its own L.A.-based pop-up store at the city’s shopping center, The Grove.
That store closed on July 28. It should be noted that pop-up stores have a limited run by design.
In June, Bloomberg reported that Honest was prepping “slowly” for an IPO, following a report in Bloomberg in February that said Honest was working with Goldman Sachs and Morgan Stanley on a public offering.
We sat down with Alba and Honest’s chief marketing officer Chris Thorne at our New York Disrupt conference in May, where we discussed the company’s growth, along with several lawsuits that have been filed against it, including a class action lawsuit that was filed last year, claiming its sunscreen product didn’t work, and a newer suit that alleges its organic baby formula includes 11 “synthetic substances that are not allowed in organic products.”
Thorne said then that Honest Company takes customer service issues seriously. He also said that while the company supports consumer advocacy groups, Honest “often gets involved in the discussion because we bring a name, Jessica’s name, and that brings a lot of attention to an issue, and it’s a smart strategy for [those consumer advocates] but unfortunate for us, because we do get brought into these.”
As for those reported discussions with bankers, Thorne said that Honest “constantly talks to advisors and banks to stay up to date on trends and competitors,” adding, “there’s nothing out of the ordinary there.”
E-commerce first companies have been a hot commodity of late, as traditional retailers look for ways to remain relevant to younger consumers. Early last month, Walmart announced plans to acquire the online retailer Jet for $3.3 billion in cash and stock. In July, the online grooming startup Dollar Shave Club was sold to the consumer giant Unilever for $1 billion.
Newer businesses that cater largely to female shoppers have also become attractive acquisition candidates. In July, for example, IT Cosmetics, an eight-year-old, Jersey City, N.J.-based company that makes 300 skin-care and make-up products, was sold to L’Oreal for $1.2 billion in cash.