Unilever Looks to Dollar Shave Club to Gain Edge on Rivals
Unilever (UL) - Get Report , the Anglo-Dutch consumer products giant behind Brut cologne and the Caress skin care brand, is adding Dollar Shave Club to its personal care portfolio in a deal reported to be worth $1 billion.
The buyer did not disclose a price for the purchase, which is reportedly in cash and Unilever's biggest U.S. acquisition since it splashed out $3.7 billion on hair and skin care company Alberto Culver Co. in 2011. With Dollar Shave Club, Unilever is looking to gain a serious edge over mainstream mass-market brands like Procter & Gamble PG Gillette and Edgewell Personal Care EPC Schick via a fast-growing direct-to-consumer mail-order offering.
Unilever shares had little reaction to the surprise announcement a day before putting out second-quarter results.
The stock was up 0.10% in London afternoon trading at 3,573 pence, giving it a market value of around £106.8 billion ($140.38 billion). Shares are 27.4% higher than they were a year ago.
Founded in 2012 and headquartered in Venice Beach, Calif., Dollar Shave Club gives its 3.2 million members a lot of bang for their buck. It peddles "a great shave for a few bucks a month," selling a range of bargain-priced blades - at $1, $6 and $9, razor handles included - and grooming products from Dr. Carver's Shave Butter to One Wipe Charlies billed as 'peppermint tingling flushable buttwipes for men'.
Laugh all you want at the silliness, some 3.2 million people have become members of the Dollar Shave Club, which Unilever says is on track to exceed $200 million in 2016 sales after $152 million in sales last year.
"Dollar Shave Club is an innovative and disruptive male grooming brand with incredibly deep connections to its diverse and highly engaged customers," said Kees Kruythoff, president of Unilever North America, in a statement. "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."
Michael Dubin, founder and CEO of Dollar Shave Club, added that the company "couldn't be happier to have the world's most innovative and progressive consumer-product company in our corner."
But is Unilever paying too much to "park its tanks on P&G's lawn," as Jefferies analysts Martin Deboo and James Letten nicely put it?
"High growth, at a high price" is how they characterize the deal in a Wednesday note that also points to Unilever's relative weakness so far in male grooming. "Reading between the lines" of the announcement, "we detect an intent for Unilever to exploit Dollar Shave as a platform for multi-category ...and multi-country assault on the male growing space, via a 'new game' platform."
And though there might be some speculation about Unilever following up with a move for Edgewell, the No. 2 player in so-called wet shaving in the U.S., the analysts less convinced. They estimate Dollar Shave's share of the U.S. shave club space at 60%, well ahead of No. 2 Harry's at 28% and Gillette, a latecomer to shaving clubs, with just 5%.
They have a "hold" rating on Unilever with a price target of 3,569 pence.