Jessica Alba’s Honest Company has been in talks to sell to a big consumer product giant


M&A is heating up in the online consumer packaged goods category

Honest Company, the diaper and personal care product company co-founded by the actress Jessica Alba, has been in talks to sell the company, several sources close to the situation said. Sources indicated that the buyer is likely to be a big consumer product company like Procter & Gamble or Unilever.

As in all acquisition talks, the discussions may not result in a deal, and a potential acquisition price is not known. But Honest Company was most recently valued at around $1.7 billion when it raised $100 million in financing last year. The five-year-old company has raised $222 million in investments overall and brought in revenue of around $300 million in 2015, according to one source.

The companies involved did not immediately respond to a request for comment.

The talks come as consumer-packaged goods companies are grappling with the increasing importance of e-commerce to their future and the challenge of competing in this new world without relying too heavily on sales through Amazon. Traditional retailers are facing similar challenges, as displayed by Walmart’s planned $3.3 billion purchase of Jet.com, a shopping site that’s only one year old.

Along the way, the consumer packaged goods giants have become intrigued by startup brands like Dollar Shave Club and Honest that have built large followings by selling consumer goods directly to customers through their own websites and not through Amazon. In a surprise purchase, Unilever purchased Dollar Shave Club for $1 billion earlier this summer.

Unilever and Procter & Gamble, as well as others like Johnson & Johnson, have historically relied on retail stores to sell their goods and have given up direct communication with their customers in the process. Around 40 percent of Honest’s business comes from selling products through deals with traditional retailers like Target and Whole Foods, but the remainder comes from online sales through Honest.com and HonestBeauty.com.

Honest Company was founded in 2011 and is led by CEO Brian Lee, a serial entrepreneur who most recently ran online shoe retailer ShoeDazzle. The company got its start by selling non-toxic, eco-friendly diapers and other baby products but has since expanded into a variety of categories including sunscreens, baby formula and makeup.

A large chunk of its online sales come from monthly deliveries of product bundles that customers subscribe to. This model has faced criticism from some customers who did not realize they were signing up for repeat deliveries and others who have argued it’s too difficult to cancel these repeat orders.

The company is also facing lawsuits that claim some Honest products, such as its detergent, contain chemicals that the company said it would avoid. Another lawsuit alleges that the brand’s sunscreen does not work as advertised. Honest has denied these claims.

As of February, Honest was prepping for an IPO but by the spring it had put those plans on hold. Sources say the company did not feel the public market was going to be receptive to its offering at that time, even as the M&A space has heated up.

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