Consumer goods giant Unilever is paying a reported $1 billion to buy an online retail start-up that has yet to turn a profit.
Unilever PLC announced it is buying Dollar Shave Club, the razor delivery subscription service known for its irreverent brand positioning and viral You Tube videos. Terms of the deal were not announced, but The New York Times and other media outlets reported Unilever is paying $1 billion in cash for the scrappy company, which has yet to turn a profit but expects to do so by yearend.
"The deal reflects the growing importance of emerging brands, vertical integration, and the consumer direct route to market favored by new CPG market entrants such as Dollar Shave Club, Honest Co., and NatureBox,” said Keith Anderson, VP of strategy & insights for the e-commerce analytics firm, Profitero. "The acquisition may also signal more consolidation in the near future. Technology has lowered barriers to entry for new market entrants like Dollar Shave Club, enabling them to drive awareness, build brand equity, and target shoppers with precision more quickly and cost effectively than in decades past."
The acquisition gives Unilever entry into the razor business, which is dominated by its rival Procter & Gamble, which owns Gillette.
“In addition to its unique consumer and data insights, Dollar Shave Club is the category leader in its direct-to-consumer space,” said Kees Kruythoff, President of Unilever North America. “We plan to leverage the global strength of Unilever to support Dollar Shave Club in achieving its full potential in terms of offering and reach.”
Founded in 2011, Dollar Shave Club has 3.2 million customers in 32 countries and is on track to exceed $200 million in revenue this year. Its product line-up has expanded beyond razors to include shaving cream and other men’s grooming products. The company was valued at a little over $600 million when it raised $75 million last summer.
Michael Dubin, founder of Dollar Shave Club, will remain as its CEO. The company will continue to operate as a direct-to-consumer business and be an independent entity of Unilever.
"DSC couldn’t be happier to have the world’s most innovative and progressive consumer-product company in our corner," stated Dubin. "We have long admired Unilever’s purpose-driven business leadership and its category expertise is unmatched. We are excited to be part of the family."
The companies expect to close the deal in the third quarter.