By Sharon Terlep 

Four years ago, Michael Dubin launched his company with a hilarious YouTube video poking fun at the pain and expense of shaving. The video went viral and created the Dollar Shave Club. Now Mr. Dubin is selling his startup for a cool $1 billion.

Unilever PLC, the European consumer products giant behind Dove soaps and Axe body sprays, said late Tuesday it was acquiring the Venice, Calif., startup. Terms weren't disclosed, but people familiar with the matter said Unilever is paying $1 billion in cash.

Dollar Shave Club, which isn't profitable, said it has signed up 3.2 million members for its mail-order service that ships out disposable razors and other grooming products for a flat monthly fee.

It has chipped away at market leader Gillette, which has responded with its own Gillette Shave Club and last year filed a patent-infringement lawsuit.

Mr. Dubin's company has been growing quickly by adding customers as well as new product categories, such as hair gels and most recently body washes. The startup had revenue of $152 million last year and is on track to exceed $200 million in 2016, according to Unilever.

In addition to giving Unilever an entry into the shaving market dominated by U.S. rival Procter & Gamble Co.'s Gillette, Dollar Shave Club's direct-to-consumer business model gives Unilever "unique consumer and data insights," said Kees Kruythoff, president of Unilever North America.

Privately, P&G executives acknowledge the company was caught off guard by success of Dollar Shave Club, which started in 2012. "It was probably on the radar but we weren't necessarily having the right conversation around what might disrupt us," said a person familiar with the company's thinking.

P&G's share of the men's razor and blade businesses in North America fell to 59% last year from 71% in 2010, according to Euromonitor. Dollar Shave Club had 5% of the market last year.

Dollar Shave Club offers to send razor cartridges directly to customers for as little as $1 a month, a model that appealed to the changing shopping habits of consumers fed up with the rising cost of a clean shave.

"The razors were just very cheap, that was the draw," said Kurt Jetta, founder of TABS Group, a retailer and consumer analytics firm.

Mr. Dubin, 37 years old, will remain CEO of Dollar Shave Club. He said Unilever promised Dollar Shave Club autonomy within the company and resources to help fuel more growth. The company will operate as a subsidiary of Unilever. He said Mr. Kruythoff proposed the acquisition after the two executives had spent time discussing a potential Unilever investment in Dollar Shave Club.

"If we can deploy those resources in service of our mission we are that much more," he said in an interview. "It just felt right to me and I really trust the people I met at the Unilever."

Mr. Dubin said he will report to a board that includes top-level Unilever executives.

The sale comes about a year after the Dollar Shave Club was valued at $615 million in a $75 million funding round led by Technology Crossover Ventures, according to people familiar with the matter. The company has raised at least $150 million in venture capital.

--Rolfe Winkler contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com

 

(END) Dow Jones Newswires

July 20, 2016 00:25 ET (04:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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