Unilever turns heads with Dollar Shave club acquisition, extending reach in male grooming category

Unilever’s $1 billion purchase of Dollar Shave Club was an eye-opening deal. While Unilever has been on a buying spree, snapping up companies such as REN, Kate Somerville, Dermalogica and Murad — all premium skin care brands — the deal with Dollar Shave represented growth in a different market. Now the industry awaits Unilever’s next move.

(To view the full Shave Report, click here.)

To be sure, it’s no industry secret that Unilever wanted “in” on the shaving business. And, it continues to sharpen its competitive stand against other global powers, such as Procter & Gamble and L’Oréal.

Unilever’s CEO Paul Polman addressed questions about Dollar Shave Club during a financial analyst conference in August.

“In these environments that we operate in, the strategic changes we are making to continue to build our business are obviously very important, and they focus on driving agility and resilience,” he said. “Secondly, we continue to evolve our portfolio, including the adoption of more flexible models for some parts of our business that operate on the edges of our traditional model,” he said. “And the Dollar Shave Club acquisition that we announced is a good example of that.”

He outlined that in the past seven years, Unilever has expanded its personal care business from 28% of company sales to now nearly 40%.

Why is he excited about Dollar Shave Club? “First and foremost, it takes us further in the male grooming category, where Unilever, if you exclude the shaving segment, is the outright No. 1,” he said. “This is much more than just a razor company. Their portfolio and their dialogue with consumers extends across male grooming into hairstyling, skin care and skin cleansing,” he said. The company noted that male grooming, pegged at a $40 billion market, is expanding faster than overall personal care.

Dollar Shave Club boasts 3.2 million members. The marketer added categories such as hair care over the past few years, so that it could bundle sales of shave items with other profitable goods. Its product range extends beyond shaving to include Wanderer personal wash, Big Cloud skin care, Boogie’s hair styling and One Wipe Charlies daily wipes.

Dollar Shave gathered traction with whimsical brand messaging and a tag line … “Shave time. Shave Money.” Quirky messages also included: “Your mother-in-law should be irritating, not your razor. Change your blade every week.” Pricing ranged from $1 to $9.

Last year, the company claimed a 16% market share of the U.S. blades category overall and a 69% share of that segment online. That compares to Gillette’s 65% global market share in blades and razors. Gillette (with Fusion, Mach3, Prestobarba and Venus) holds over 20% of the male shavers market and almost 50% of the female epilators market worldwide.

Polman likes what he sees in Dollar Shave Club, an innovative and disruptive brand with a cult-like following, he noted. The deal ushered Unilever into the $4.5 billion shave category.

And for Unilever, the investment stretches beyond shaving. “We are able to acquire the knowledge that they have built very quickly and undoubtedly will apply it also on other brands,” Polman said.

Dollar Shave Club, run by its founder Michael Dubin, will continue being built up in the United States, its core market.

“But we’ll also look at other expansion opportunities beyond that, and then [leverage] the knowledge that we have acquired here across some of our other businesses,” Polman said.

The industry is rife with questions. Will the brand expand to brick and mortar? Or will it be an exclusive with one major trade partner? No matter what, industry experts expect a showdown between Unilever and the other shave powers — especially Procter & Gamble’s Gillette. Last year, Gillette launched a Shave Club allowing people to sign up for blades at a pace they wanted as a move many saw as competing with Dollar Shave Club.

The purchase also underscores just how much online-only retailers seek other opportunities, especially those that can expand to physical doors. It was just one of many acquisitions in the personal care and beauty industry to date in 2016. There was even another deal in online shaving with ShaveMOB.com, an online retailer of razor blades for men and women, acquiring 800Razors, a U.S.-based personal care products company.

ShaveMOB.com said the acquisition will drive further e-commerce growth by expanding the company’s customer base and brand equity. 800Razors invested millions of dollars in the development of its brand, creating strong relationships with customers and building a media footprint through partnerships with famous athletes, according to ShaveMOB.com.