Scuttled Edgewell-Harry's razor deal raises questions about the future of d-to-c
Schick marketer Edgewell Personal Care’s withdrawal from its nearly $1.4 billion acquisition of Harry’s earlier this month after an antitrust complaint by the Federal Trade Commission is raising questions about the future of the shaving business and other direct-to-consumer brands.
Some investment bankers believe Harry’s will have trouble finding another buyer, certainly one as motivated to pay as much as Edgewell, but needs to because it’s yet to turn a profit.
Harry’s, which according to Edgewell has threatened to sue over the abandonment of the deal, declined to comment. But a person familiar with the company says it’s turned profitable in recent months as it expands the Harry’s men’s brand and Flamingo women’s brand to more retailers and more categories beyond shaving.
“There’s always another buyer out there,” says Gary Stibel, founder and CEO of New England Consulting Group.
One brand that seems most directly affected by the FTC’s decision is women’s shaving brand Billie, which Gillette and Venus marketer P&G agreed to buy last month.
But issues with Billie and Harry’s are different. Billie is much smaller and doesn’t make its own blades. Harry’s owns one of only five razor manufacturing operations in the world, and the deal would have cut that to four, leaving fewer options for new entrants to find a company to make their products.
The Edgewell deal’s collapse adds to questions about prospects for d-to-c brands. That’s particularly so given that it happened the same day d-to-c player Brandless announced it was closing shop without a buyer after two years and $300 million in venture investment from Softbank.
One investment banker who spoke not for attribution said the d-to-c movement has largely played out, as big companies have bought out or begun to neutralize the most promising players.
While players like Harry’s may have moved toward profitability by moving into traditional retailers, it’s not clear that selling CPG products only online is profitable for anyone. Another investment banker believes the pressure on d-to-c brands isn’t shipping, but the rising costs of search and social-media advertising.