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What Can the Honest Co. IPO Tell Us?

wellness and beauty
olgasamoilova on Deposit Photos

It’s not every day that a celebrity creates an honestly good product. Sometimes, celebs venture into entrepreneurship and only make sales from their popularity. You may be surprised to learn that actress Jessica Alba is behind the brand Honest Co., which you can find on the shelves of 32,000 retailers in North America. The company has now filed for an IPO, with a possible value of $1.5 billion. But its success isn’t because of Alba; people love the product. Is this a new era of supercharged success for wellness brands and female founders?

Honest ingredients

Honest Co. sells clean products for babies, bath and body, beauty and home. Alba co-founded the brand in 2011 because she had severe allergies and asthma and struggled to find wellness products that worked without harsh chemicals. She has even lobbied on Capitol Hill for chemical legislation reform. Now, as the chief creative officer, she makes sure Honest uses honest ingredients and doesn’t hide behind a curtain.

The success of this brand illustrates how the consumer is becoming more interested in natural, safe and open products. Suzanne Kopulos, a co-founder at Beauty Consultants and Strategists, told Forbes that beauty brands are acquiring companies that use clean ingredients. “That is one of our criteria, first and foremost,” she said.

For the conscious consumer

There are a few other reasons that may have contributed to this brand’s growth. First, it has diverse leadership. As of Dec. 31, 2020, nearly half of the company’s workforce were people of color, 68% of the workforce were women, and women represented 53% of leadership, according to MarketWatch. Second, Honest is not only clean in ingredients but also in emissions. The brand’s online orders are carbon neutral; it reached its greenhouse gas emissions goal two years before the projected date. These are two areas that have been important to consumers in recent years.

Will investors make money?

Honest Co. earned $300.5 million in 2020 compared to $235.6 million in 2019. But the company was honest (Sorry, I had to.) with investors, saying it’s had net losses every year since launch. Last year, it had a net loss of $14.5 million, and it expects to increase spending as it grows. But the brand said its niche would continue to grow in popularity and profit.

Reuters said Honest is planning to apply the IPO funds to marketing, direct-to-consumer advertising, new products and complementary businesses. Will you invest in Honest Co.? Which wellness and beauty brand could be next?

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