After announcing its IPO on April 9, The Honest Co. debuted on the Nasdaq on May 5 under the ticker HNST, with what became a watershed moment for clean and better-for-you brands.
The company, founded in 2012, makes baby, beauty and household products, and markets itself as a clean and conscious brand. In the S-1 document that announced its official IPO status, The Honest Co. stated its revenue jumped about 28% to $300 million for the year ending December 31, 2020. Its first day of trading on Wednesday saw the share price pop, increasing by nearly 44% from $16 to $23 and giving the company a valuation of $2.68 billion, according to The Wall Street Journal. As of this story, that share price fell to $19.25. But the IPO provided Honest Co. more than $100 million, which the company plans to use for expanding its product lines and geographic reach.
Glossy spoke with Nick Vlahos, The Honest Co. CEO, and Jessica Alba, founder and chief creative officer, about their plans for the company’s growth, the performance of its beauty category and the importance of Alba’s founder story.
What will the initial IPO funds be used for?
Vlahos: The first is marketing. We will drive our diapers and wipes business, our personal care and skin-care business, as well as household and wellness; these are the key priorities. The second area is really product innovation. When I joined back in 2017, we built out our internal laboratories and built out our capabilities in the space of clean ingredients and sustainability, as well as effectiveness around our products. The third area is going to be around accessibility, which is our omnichannel distribution plan with our digital capabilities. Our [e-commerce] business right now is 55% of our [revenue] and the other 45% is brick-and-mortar retail. We will expand our digital and [brick-and-mortar] retail footprints, domestically as well as internationally.
How strategically important is the clean beauty category to The Honest Co.?
Vlahos: It’s a great category for us. This past year, our skin, personal care and beauty business grew by 35% [year-over-year] while other competitors were talking about how their business was soft, and they struggled during the pandemic. We actually grew both cosmetics and skin care. From an innovation standpoint, what’s really unique is that not only can we deliver clean, safe ingredients, but effectiveness as well.
Alba: Color cosmetics was a big focus for me and there is so much opportunity to think about skin health as it relates to color cosmetics. But also then [take that idea] and talk to the consumer about their perspective. There are a lot of corporate setups where you have people observing and collecting data to drive their decisions, but by then, the trend has already passed and the consumer has already been there. But we will continue to innovate and pave the way in the clean space with products and how we communicate with consumers, and even how we formulate with sustainability and skin health in mind.
What is the current status of the “better-for-you” category? Where does The Honest Co. fit within that market?
Vlahos: The genesis of this business, when Jessica started it back in 2012, was always around this lifestyle brand concept that focuses on health and wellness. The challenge for a lot of the upstarts and a lot of these different brands is that they’re vertically focused. They are challenged by going across multiple categories. But we saw 34% of customers on Honest.com in 2020 came in through our skin, personal care and beauty category, while another roughly 34% of new customers came from household and wellness products. This ability for us to go across these categories is where we have momentum and where consumers are moving, not only here domestically but also internationally.
Alba: We have authenticity in this space, where some other brands may be trying to dabble in the space. But if it’s not core to who they are, what they do or their mission, then consumers can see right through it. A lot of startups may not always have the expertise to know how to scale the business, increase the margin profile and put good growth on the balance sheet. That’s how you create a brand that can stand the test of time — if you can achieve your business goals, but then also lean into a mission and values that are differentiated from the marketplace.
How much is the branding of The Honest Co. tied to Jessica Alba and vice versa?
Alba: More people are more interested in the founder story of a business and want to connect [with a brand] on a human level. There’s just something so important about knowing that it’s not just a bunch of suits or people who have short-term goals, but that there’s a human being at the center of this. Ultimately, that is what people do connect with and it’s what I connect with. Access to information and access to businesses through social media makes [consumerism] a better playing field when you can approach it in a more authentic way. My connection to Honest Co. is just authentically what it is, and if that’s important to people, it’s there. But we’re really about telling stories and resonating with people, and meeting them in key moments in their lives.