Unilever announced Wednesday that it has agreed to buy men’s grooming brand Dollar Shave Club, a deal that would bring a disruptive start-up under the wing of a goliath of the consumer product business.
Dollar Shave Club has rapidly amassed 3.2 million members in its e-commerce subscription shaving business, which allows men to sign up for monthly deliveries of razor blades to their doorsteps. It’s a model that seems to have some momentum with customers right now: Harry’s, another start-up, has a similar setup. And stalwart razor brand Gillette, owned by Unilever rival Procter & Gamble, launched a subscription service when it saw the kind of traction the newcomers were getting.
The deal suggests that Unilever, a giant that includes brands such as Dove, Vaseline and Axe, is looking for ways to gird itself for a changing shopping environment. In a news release announcing the deal, a Unilever executive noted Dollar Shave Club’s “unique consumer and data insights,” suggesting it might want to figure out how to leverage some of the start-up’s know-how in that area to lift up its other personal care brands.
It’s also noteworthy that Unilever praised Dollar Shave Club as “the category leader in its direct-to-consumer space.” In other words, Dollar Shave Club is accustomed to selling directly to consumers, while, Unilever, of course, is accustomed to people shopping for its brands in drug stores or in supermarkets. It’s not hard to see why Unilever would want to join forces with a brand steeped in that kind of selling. Many consumer goods lines that have traditionally sold through stores — from packaged foods to sporting goods — are giving fresh consideration to whether it’d be advantageous for them to sell online without retailers as an intermediary.
Meanwhile, the industry has surely taken notice of Amazon.com’s forays into making private-label products such as diapers and apparel. And that probably means companies such as Unilever are looking for ways to be prepared for potential threats to their turf from the e-commerce giant, which has a loyal base of tens of millions of Prime members. (Jeffrey P. Bezos, chief executive of Amazon, owns The Washington Post.)
The companies did not disclose the terms of the deal, but Bloomberg News reported it was worth about $1 billion.
Dollar Shave Club launched in 2012 and found an audience thanks to brash marketing, often in the form of YouTube videos. The ads focus heavily on how expensive razors can be and presents Dollar Shave Club and its cheap blades as the answer. (In one ad, when a woman asks her partner to replace a gross-looking razor blade, the guy responds, “Sure, I’ll just sell one of the Picassos. Maybe the kids.”)
In that way, the company is part of a wave of start-ups promising to wring costs out of an old-school business: There’s Casper Sleep and Leesa vowing to try to do the same with mattresses, Warby Parker with eyeglasses and Boll & Branch with bed sheets.
Dollar Shave Club has grown quickly, with the company saying it is on track to pull down net sales of more than $200 million this year.
“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,” Kees Kruythoff, president of Unilever North America, said in a news release.
Dollar Shave Club’s founder and chief executive, Michael Dubin, will remain at the helm of that brand.
The Unilever empire includes items such as Hellmann’s mayonnaise and Lipton teas, but personal care products are the cornerstone of its business, comprising 38 percent of total sales. In acquiring Dollar Shave Club, it is probably looking to make some inroads in a category that is dominated by two other companies: Procter & Gamble’s Gillette brand and Edgewell Personal Care’s Schick brand.