The Honest Company

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

History


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

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. The company has a strong charitable mission that has been likened to Toms Shoes, Warby Parker, and Etsy. It donates products, revenues and labor.

The Honest Company’s 2013 sales were $50 million. Honest raised $70 million from venture capitalists in the summer of 2014 in preparation for an imminent initial public offering. As of August 2014, the company's products were available at retail stores in the United States and Canada. The financing put a value on the company of $1 billion. 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. The company had plans to expand to England and Australia, but the summer 2014 funding was primarily to prepare for a launch in China. A company press release said the funding was to aid product development and expansion. 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. The company eventually totaled $170 million in sales in 2014.

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. 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. In late 2015, the company acquired Alt12 Apps, the makers of popular apps such as Baby Bump, Pink Pad and Kidfolio. As of August 2015, the company had never employed traditional media such as print ads, television or billboards.

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. 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.

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 dangers and potentials harmful chemicals. On the back of the products they have listed the safe chemicals that they use.

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.

Products and distribution
Honest is known for its safe products. 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. Whole Foods and Costco were The Honest Company's initial retail distributors. The company began selling in Target Corporation on June 15, 2014. Other stores that carried the company's products by mid 2014 included Buy Buy Baby and Nordstrom. By the end of the third quarter of 2014, the company carried 90 products. Its leading selling product was diapers, at the time.

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.

In March 2016, it was reported by The Wall Street Journal 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." 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. However, sodium coco sulfate is a mixture of synthetic chemicals composed primarily of SLS. 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. EFP had removed its claims of SLS-free product from its own website in late 2015.

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. 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.

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

Honest Beauty
On September 9, 2015, the company opened the Honest Beauty brand as a separate entity with its own website and logo. 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. 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. The brand began selling the beauty line at Target in spring 2017.

The Honest beauty line can be bought on their website honestbeauty.com. They have also put their products at Ulta Beauty, Target and Sephora. They have about 83 products ranging from makeup to skincare products and hair care line. 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. Honest Beauty has reportedly reached more than 10 million dollars in retail sales as of October 2016. 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.