Commentary

Unilever Pays A Handsome Penny For Dollar Shave Club

Unilever is acquiring Dollar Shave Club, which will continue to operate as an independent — and presumably irreverent — company under founder and CEO Michael Dubin. 

“Unilever’s acquisition underscores the success of Dollar Shave Club’s unconventional marketing for its range of men’s beauty products, which also includes hair styling products and skin care all sold by subscription using home delivery,” writes John Michael Brown for Financial Times. “Dollar Shave Club sends razor cartridges directly to customers for as little as $1 a month, a model attractive to consumers fed up with shopping for expensive shaving equipment.”

“No financial terms were disclosed, but multiple sources close to the deal tell Fortune that Unilever is paying $1 billion in cash” for the business, writesFortune’s Dan Primack. It is based in Venice, Calif.

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“If the pricing is true, the transaction will be the third largest ever in e-commerce, only beaten by Zulily and Wayfair,” points out John Mannes for TechCrunch.

“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,” write Mike Isaac and Michael J. de la Merced for the New York Times. “But as the model grew more popular and the market became inundated with subscription-based products, it became more difficult for some start-ups of the ilk to continue raising money.”

“Dollar Shave Club is an innovative and disruptive male grooming brand with incredibly deep connections to its diverse and highly engaged consumers,” Kees Kruythoff, president of Unilever North America, says in a release announcing the agreement. “In addition to its unique consumer and data insights, Dollar Shave Club is the category leader in its direct-to-consumer space. 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.”

Dollar Shave Club burst into our collective awareness in March 2012, with a YouTube video starring Dubin that now has nearly 23 million views. 

The deal can be traced to a dinner between Dubin and Kruythoff six or seven months ago, reportsRecode’s Jason Del Ray, pointing out that Unilever does not own a razor brand, although it has personal care brands such as Axe and Dove. “The idea at the time was that Kruythoff would potentially take an advisory role with Dollar Shave Club, or Unilever might invest in the startup,” he writes.

“We weren’t looking to be acquired … but he did a really great job convincing us of a few things,” Dubin tells Del Ray, “including ‘how ambitious and aggressive and innovative they are’ and ‘the economies of scale they can bring in a lot of different areas.’

“Translation: Unilever can help the startup get better deals on things like advertising buys and product manufacturing,” writes Del Ray.

“Unilever will look to expand the subscription model Dollar Shave Club has used since 2012 to accumulate 3.2 million customers and take on brands such as P&G’s Gillette and Edgewell Personal Care Co.’s Schick in the estimated $3 billion U.S. men’s shaving products market,” write Bloomberg’s Sarah Frier and Matthew Boyle.

But competition “stretches beyond Gillette and Schick,” observe the NYT’s Isaac and de la Merced. “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,” as well as Bevel, a razor targeted to African-Americans.

Procter & Gamble, meanwhile, “blindsided by the success of the upstart Dollar Shave Club,” the Wall Street Journal’s Sharon Terlep reports, is itself experimenting with ways of “cutting out the middleman.” One is the Tide Wash Club it has launched in Atlanta — an online subscription service for Tide Pods that offers free shipping at regular intervals.

“Another new offering: Tide Spin, an undertaking P&G is calling the ‘uberization of laundry,’ in which customers in parts of Chicago can use a smartphone app to order laundry pickup and delivery from Tide-branded couriers,” Terlep writes.

P&G’s razor brand, Gillette, filed a federal lawsuit against Dollar Shave Club in December, claiming that several of its products cut it too close to a patented formula Gillette invented to coat its razors and improve the quality of shaves. Whatever the outcome of that case, Unilever’s entry into the market insures that the razor wars are not going to be decided by the bang of a judge’s gavel.

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