STARTUP BRUSHUP
Colgate to invest in online-subscription firm as competition heats up on the web,
Colgate-Palmolive Co. is turning to an online startup to help it sell products like toothpaste through a home-subscription service, the latest experiment by a big household-products maker to cut out traditional retailers as sales shift online.
Colgate, which has been selling its namesake product since 1873, is close to a deal to acquire a minority stake in Hubble, people familiar with the matter say. The two-year-old New York company currently sells contact lenses in brightly coloured boxes online.
As part of the deal, Hubble would develop new online subscription avenues for some of Colgate’s products, the people said. The first one, focused on oral care including teeth whitening, is expected to start as soon as this year, while others in areas like pet food remain under consideration, the people said.
The two companies will share revenue from the ventures. Financial terms couldn’t be learned.
The better-late-than-never move brings Colgate, maker of products from Tom’s toothpaste to SoftSoap, into an arena vexing the biggest makers of household goods.
Subscription-service startups have yet to deliver profits for the most part, but have succeeded in wooing shoppers en masse from industry stalwarts, forcing them to respond. In toothpaste alone, there are several upstarts like Quip and Goby selling monthly subscrip- tions for toothbrushes or paste.
Defections to razor subscription services Dollar Shave Club and Harry’s forced Procter & Gamble Co.’s Gillette to slash prices and shift focus toward new products. P&G executives are now exploring a range of alternatives to the traditional retailer model.
Two years ago, Unilever PLC bought Dollar Shave Club for $1 billion. P&G last year acquired Native Deodorant, a startup selling natural deodorant online.
“We’re working very hard to stay on top of that and not let a direct-to-consumer model slap us the way it slapped Gillette,” Colgate CEO Ian Cook said at the company’s shareholder meeting in May, responding to an investor who said he worried Colgate could lose customers to a new toothpaste club.
Colgate is struggling with tepid growth, with 2017 sales up just 2%, not including acquisitions, divestitures or currency moves. The company’s namesake toothpaste has sputtered as well. Sales of Colgate brand toothpaste were up 1.5% in the 52 weeks ended June 16, while overall toothpaste sales rose nearly 3% in the same period, according to Nielsen data provided by Wells Fargo.
Online sellers like Hubble eschew traditional advertising, instead pouring money into social-media marketing to sign up customers for recurring subscriptions. The model has become an alluring workaround for manufacturers struggling in the age of e-commerce, cutting out retailers.
Under pressure from Amazon.com Inc., big retailers like Walmart Inc. have been pressuring consumer-product companies to lower prices and speed up delivery of products. Despite these tensions, the vast majority of household products are still sold through traditional brick-and-mortar stores.
Colgate has, as of yet, done very little in the space. The company has instead focused on such products as a $100 electronic toothbrush that pairs with an app to coach brushers on their technique.
Hubble was founded by Ben Cogan and Jesse Horwitz, who met as interns at a hedge fund. Existing Hubble investors include Founders Fund and Greycroft Partners. The company, which employs around120 people, said it raised $26.5 million in 2017.
Additional investment from Colgate and others is expected to add another $40 million to the till.