The Honest Company

The Honest Company is an American consumer goods company, founded by actress Jessica Alba. It emphasizes household products to supply the marketplace for ethical consumerism. The company had $250 million in 2016 sales,[1] and was valued shy of $1 billion as of October 2017.[2] The Honest Company has raised multiple rounds of venture capital, and was anticipating an initial public offering as of 2016.[3][4] Honest serves the United States and Canada, and planned to launch its beauty line products in Western Europe in 2019.[5][6]

The Honest Company
TypePrivate
IndustryRetail
Founded2011 (2011)
FoundersJessica Alba, Brian Lee, Sean Kane, Christopher Gavigan
HeadquartersPlaya Vista, California
Area served
United States, Canada
Key people
Founder / Chairperson Jessica Alba
CEO Nick Vlahos
CPO Christopher Gavigan
ProductsConsumer goods
Websitehonest.com

History
Jessica Alba, co-founder of The Honest Company
I founded The Honest Company on this idea: Everything that touches you and your family--everything in your home--needs to be nontoxic, needs to be effective and beautiful to look at, and needs to be affordable.

–Jessica Alba[7]

Brian Lee, co founder

Company founder Jessica Alba was inspired by the 2008 birth of her first child, Honor, and her own history of childhood illnesses to create a company that provided an alternative to the prevalent baby products with ingredients such as petrochemicals and synthetic fragrances.[8] She was compelled to become serious about this venture when one of her mother's baby laundry recommendations caused her to have a welt outbreak.[9]

It took Alba three years to find her business partners Brian Lee, Sean Kane, and Christopher Gavigan.[7] Despite advice that she should start small with a singular focus, Alba launched the company in 2012 with 17 products.[7] Christopher Gavigan wrote the book, Healthy Child Healthy World, that addresses all the different toxins that children are exposed to in traditional household products.[5]

In the U.S., the F.D.A has banned fewer than a dozen harmful chemicals, while in Europe more than 1,300 chemicals are deemed unsafe for household products. With this research, Alba and Gavigan decided to create a company that avoids putting those 1,300 chemicals in its products.[10]

While building her company, Alba has lobbied the United States Congress to make testing of consumer products in the marketplace for chemical inputs more stringent.[8] The company has a strong charitable mission that has been likened to Toms Shoes, Warby Parker, and Etsy. It donates products, revenues, and labor.[7][11]

The Honest Company's 2013 sales were $50 million.[11] Honest raised $70 million from venture capitalists in the summer of 2014 in preparation for an imminent initial public offering.[7][12] As of August 2014, the company's products were available at retail stores in the United States and Canada.[13] The financing put a value on the company of $1 billion.[8][11] Prior to the 2014 round of financing led by Wellington Management Company, the company had raised $52 million in financing from ICONIQ Capital, General Catalyst Partners, Institutional Venture Partners and Lightspeed Venture Partners.[13]

The company had plans to expand to England and Australia, but the summer 2014 funding was primarily to prepare for a launch in China.[11] A company press release said the funding was to aid product development and expansion.[13] In November 2014, the company had 275 employees and was projected to do $150 million in sales. 80% of its sales were online via a monthly subscription service with the remainder being done in department stores and discount warehouses.[8][11] The company eventually totaled $170 million in sales in 2014.[14]

In July 2015, Jessica Alba announced that The Honest Company would be moving its headquarters from 2700 Pennsylvania Avenue in Santa Monica to the Playa Vista neighborhood of Los Angeles in early 2016.[15] The following month, it announced a new round of funding generated an additional $100 million of venture capital, implying a valuation of $1.7 billion.[14] In late 2015, the company acquired Alt12 Apps, the makers of popular apps such as Baby Bump, Pink Pad, and Kidfolio.[16] As of August 2015, the company had never employed traditional media such as print ads, television or billboards.[17]

In March 2017, The Honest Company announced that Clorox veteran Nick Vlahos would replace Brian Lee as Chief Executive Officer. Vlahos worked to grow several Clorox brands, including Burt's Bees, Brita and Green Works. At that time, it was announced that Brian Lee would remain on the board in an advisory role.[18] In early May some customers were having trouble with the baby wipes because they had dark spots on the wipes. Tests were done and it was confirmed that there were mold in some products. The company apologized for the problem and reassured that their products are safe and mold free.[19]

The packaging on the products are colorful and they reflect on the four different scents. In front of the product they have labeled what chemicals that they don't put in their products. The chemicals that they don't use are said to be dangerous and potentially harmful chemicals. On the back of the products they have listed the safe chemicals that they use.[20]

In October 2017, The Honest Company closed a series E round of funding. After settling two lawsuits in the summer of 2017, the valuation was set at $19.60 per share down from the Series D shares sold in 2015 at $45.75. Thus, the company's value was below 1 billion.[21][22]

Products and distribution

The Honest Company markets its products as safe and eco-friendly.[23] The company also touts its Honestly Free Guarantee that it does not use "health-compromising chemicals or compounds", including a specific list of products it promises to never allow in its products.[24][25] Whole Foods and Costco were The Honest Company's initial retail distributors.[11] The company began selling in Target Corporation on June 15, 2014.[26] Other stores that carried the company's products by mid 2014 included Buy Buy Baby and Nordstrom.[27] By the end of the third quarter of 2014, the company carried 90 products.[9] Its leading selling product was diapers, at the time.[7]

In 2015, a controversy surrounding Honest's SPF 30 sunblock occurred when multiple customers complained of skin burns. These reports occurred shortly after the product had been repackaged and reformulated with reduced zinc oxide levels to improve aesthetics.[28]

In March 2016, it was reported by The Wall Street Journal[29] that Honest's liquid laundry detergent product contained "a significant amount" of sodium lauryl sulfate or SLS, a synthetic surfactant that the company claimed it would "never consider for use in anything. Period."[24][30] In an immediate response to the WSJ article, The Honest Company stated that its product does not contain SLS, but does contain sodium coco sulfate which is characterised by The Honest Co. as the "gentler alternative" to SLS.[31] However, sodium coco sulfate is a mixture of synthetic chemicals composed primarily of SLS.[32] Honest's detergent is sourced from Earth Friendly Products (EFP) which did not test for SLS. EFP in turn purchased untested chemicals from Trichromatic West which also did not test for SLS.[33] EFP had removed its claims of SLS-free product from its own website in late 2015.[34]

In April 2016, Good Morning America reported that The Honest Company was being sued for representing its infant formula as organic even though this product contains 11 synthetic substances prohibited under federal law in organic products.[35] Honest Company stated that the infant formula had been FDA approved and certified USDA Organic in accordance with the National Organic Program. In December 2016, The Los Angeles Superior Court entered judgement for The Honest Company, dismissing the complaint permanently.[36]

In October 2016, it was reported that some customers had experienced difficulty when trying to cancel subscriptions to the company's recurring diaper service.[37] Shortly thereafter, Honest announced it would release a new online cancellation feature.[38] The brand began selling its products at CVS and Babies R Us in spring 2017, and on Amazon in July 2017.[39]

Honest Beauty

On September 9, 2015, the company opened the Honest Beauty brand as a separate entity with its own website and logo.[40] Honest Beauty launched with an 83 element product line (17 skin-care products and a 66-piece makeup range). Its products are derived from botanicals free of parabens, phthalates, petrolatum, sulfates and chemical sunscreens. The launch took place at Trump SoHo in New York.[41] Beginning September 25 of that year, the brand opened a brick and mortar presence in a six-month pop-up retail shop in The Grove.[17] The brand began selling the beauty line at Target in spring 2017.[42]

The Honest beauty line can be bought on their website honestbeauty.com. They have also put their products at Ulta Beauty, Target, Sephora and Walgreens. They have about 83 products ranging from makeup to skincare products and hair care line.[43] The company created this line because their clients were asking the founders to create a beauty line that is safe and clean from potentially harmful chemicals. By late 2016, The Honest Beauty was looking to be sold in Western Europe and Australia.[44] Honest Beauty has reportedly reached more than 10 million dollars in retail sales as of October 2016.[44] Honest Beauty is the only planned set of products slated for the company's 2019 debut in Western Europe (Germany, France, Spain, Italy, Poland, the Netherlands, and Austria) in the Douglas stores that was announced in May 2018.[45]

Notes
  1. "Jessica Alba's Honest Company Is Realizing That It's Not a Tech Startup". Inc.com. February 10, 2017. Retrieved June 3, 2018.
  2. "Jessica Alba's Honest Co. Cuts Its Valuation in New Funding Round". Fortune. Retrieved June 3, 2018.
  3. Blakely, Lindsay. "How Jessica Alba Proved Her Doubters Wrong". inc. Retrieved July 20, 2017.
  4. Huspeni, Andrea. "Jessica Alba's Startup Nabs $25 Million in Funding". Entrepreneur. Retrieved July 20, 2017.
  5. "THE HONEST COMPANY". Tower Equity.
  6. "The Honest Company". Pagan Research.
  7. Blakely, Lindsay (November 2014). "How Jessica Alba Proved Her Doubters Wrong". Inc. Retrieved November 10, 2014.
  8. Harlow, John (November 19, 2014). "Jessica Alba to float $1bn eco-friendly product company". The Australian. Retrieved November 10, 2014.
  9. O'Conor, Claire (June 15, 2015). "How Jessica Alba Built A $1 Billion Company, And $200 Million Fortune, Selling Parents Peace Of Mind". Forbes. Retrieved October 28, 2017.
  10. Blasberg, Derek. "How Jessica Alba Built a Billion-Dollar Business Empire". Vanities. Retrieved April 27, 2018.
  11. Chapman, Lizette (August 26, 2014). "Jessica Alba's The Honest Co. Raises $70M, Preps for IPO". The Wall Street Journal. Retrieved November 12, 2014.
  12. Lorenzetti, Laura (August 26, 2014). "Jessica Alba startup The Honest Co. raises $70 million as it heads toward IPO". Fortune. Retrieved March 10, 2015.
  13. Johnson, Zach (August 27, 2014). "News/Jessica Alba's The Honest Company Valued at Nearly $1 Billion Two Years After Its Launch". Eonline. Retrieved November 12, 2014.
  14. MacMillan, Douglas & Rolfe Winkler (August 13, 2015). "Jessica Alba's Startup, Honest, Valued at $1.7 Billion". The Wall Street Journal. Retrieved August 13, 2015.
  15. "Honest Co. moving headquarters to Playa Vista". LA Biz. Bizjournals.com. July 28, 2015. Retrieved July 29, 2015.
  16. "Jessica Alba's Honest Company quietly acquired BabyBump, Pink Pad app-maker last year". Mobihealthnews.com. February 8, 2016. Retrieved February 8, 2016.
  17. Medina, Marcy (August 19, 2015). "Jessica Alba Launches Honest Beauty". Women's Wear Daily. Retrieved September 16, 2015.
  18. Thomas, Lauren (March 16, 2017). "Jessica Alba's Honest Company just got a new CEO". CNBC. Retrieved March 17, 2017.
  19. Ng, Serena (January 5, 2018). "No Longer A Unicorn, Jessica Alba's Honest Co. Struggles to Grow". Wall Street Journal. ISSN 0099-9660. Retrieved April 30, 2018.
  20. Foley, Katherine Ellen. "A chemist explains why the Honest company toxic ingredient scandal isn't really a scandal". Quartz. Retrieved April 27, 2018.
  21. Korosec, Kirsten (October 5, 2017). "Jessica Alba's Honest Co. Cuts Its Valuation in New Funding Round". Fortune. Retrieved June 4, 2018.
  22. "The Honest Company Closes Series E Financing: Round Led by Fidelity Management & Research Company along with Other Existing Investors". Business Wire. October 5, 2017. Retrieved June 4, 2018.
  23. Greenfield, Rebecca (September 9, 2014). "How The Honest Company Nailed The Formula For Eco-Friendly Products". Fast Company. Retrieved November 10, 2014.
  24. Moran, Gwen (September 9, 2015). "Jessica Alba's Honest Company Just Launched a Beauty Line". Entrepreneur. Retrieved September 16, 2015.
  25. Zarya, Valentina (August 14, 2015). "Telling the truth pays: Jessica Alba's Honest Company is worth $1.7 billion". Fortune. Retrieved September 16, 2015.
  26. "Jessica Alba's The Honest Company Will Launch at Target". Target Corporation. June 1, 2014. Retrieved November 13, 2014.
  27. Chesters, Laura & Maria Tadeo (August 28, 2014). "The Honest Company: Jessica Alba's diaper business valued at $1 billion ahead of IPO". The Independent. Retrieved November 13, 2014.
  28. Kroll, David (August 3, 2015). "The Failure Of Jessica Alba's Honest Company Sunscreen Explained". Forbes. Retrieved August 5, 2015.
  29. Ng, Serena. "Laundry Detergent From Jessica Alba's Honest Co. Contains Ingredient It Pledged to Avoid". The Wall Street Journal. Retrieved March 10, 2016.
  30. "honestly FREE guarantee". Archived from the original on February 2, 2016. Retrieved March 11, 2016.CS1 maint: bot: original URL status unknown (link)
  31. Rosenthal, Mike (March 11, 2016). "Jessica Alba's Honest Co. Lashes Out Over Ingredients Report". The Hollywood Reporter.
  32. Gloxhuber, C., Klaus Kunster (1992). Anionic Surfactants: Biochemistry, toxicology, dermatology (2nd ed.). New York.CS1 maint: multiple names: authors list (link)
  33. Sherman, Erik (March 11, 2016). "Jessica Alba's Honest Company Brand Is Burned: Keeping a promise to customers takes more than wishful thinking". Inc. Retrieved March 15, 2016.
  34. Ng, Serena (March 14, 2016). "Maker of Honest Detergent Changed Its Claims: Earth Friendly Products removed marketing claims about sodium lauryl sulfate from its website last year". The Wall Street Journal. Retrieved March 15, 2016.
  35. KIM, SUSANNA (April 28, 2016). "Jessica Alba's Honest Company Sued Over Organic Infant Formula". Good Morning America (ABC). Yahoo News. Retrieved May 1, 2016. The Honest Co. is falsely representing its Premium Infant Formula as 'organic' even though this product contains 11 synthetic substances prohibited under federal law in organic products," Katherine Paul, associate director of the Organic Consumers Association, told ABC News. "This is unacceptable.
  36. O'Connor, Clare. "Court Dismisses Honest Co. Baby Formula Suit As Organic Group Files Appeal". Forbes. Retrieved July 20, 2017.
  37. Townsend, Tess. "Customers Say Honest Company Not so Honest About Subscriptions". Inc. Retrieved July 20, 2017.
  38. Tandon Copp, Lucy. "The Honest Company confirms new subscription cancellation feature coming soon". Cosmetics Business. Retrieved July 20, 2017.
  39. Kell, John. "Jessica Alba's Honest Co. To Sell Goods on Amazon.com". Fortune. Retrieved July 20, 2017.
  40. APATOFF, ALEX. "Jessica Alba Launches Line of Beauty Products for The Honest Company". People. Retrieved July 20, 2017.
  41. Muto, Jordan (September 13, 2015). "Jessica Alba launches beauty line amid Honest Company lawsuits". USA Today. Retrieved September 16, 2015.
  42. Brookman, Faye. "Target adds Jessica Alba's Honest Beauty to its merchandise mix starting March 26". latimes. Retrieved July 20, 2017.
  43. Sciarretto, Amy. "Jessica Alba's Honest Beauty Has A New Retailer". Bustle. Retrieved April 27, 2018.
  44. "The Honest Company's not terrible but not very good 2016 – TechCrunch". techcrunch.com. December 11, 2016. Retrieved April 27, 2018.
  45. Blakely, Lindsay (May 29, 2018). "Jessica Alba's Honest Company Bets Big on Makeup". Inc. Retrieved June 4, 2018.
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