The Brave Ones

Michael Dubin: Shaving America

01 The Deal
02 The Ad
03 The Rival
04 The Future

Nancy Dubin is sitting in the living room of her home in Bryn Mawr, Pennsylvania, miming being on the phone with her son Michael. She’s telling the story of how he negotiated the sale of his razor business Dollar Shave Club (DSC) to consumer goods conglomerate Unilever.

“Michael says to me: ‘This is how the conversation went, Mom. Hi. Oh, you wanna buy into my company? Okay. How much? $400 million? No, I'm sorry, that won't be enough,’” she told CNBC’s “The Brave Ones”.

“Hi. Oh, you wanna buy into my company? Okay. How much? $400 million? No, I'm sorry, that won't be enough.”
Michael Dubin relates the call with Unilever to his mother, Nancy Dubin.

Michael Dubin probably has his mom to thank for his way with figures. When the 38-year-old was growing up, she made him and his younger sister solve math problems on days when the snow was so thick they couldn’t get to their high school near Philadelphia, PA.

“They hated it. Michael, to this day, they make fun of me. ‘You made us do school (when) all the other kids were out playing.’ And I said, ‘Well, it didn't hurt you any.’ He would agree - it really instilled the whole idea that work and play are both important,” Nancy said.

Fast-forward from those snowy school days to the summer of 2016 and that work ethic paid off: Dubin sold the Dollar Shave Club to consumer goods conglomerate Unilever, for substantially more than $400 million. The final price was $1 billion, an acquisition that “raised a lot of eyebrows” on Wall Street, according to CNBC anchor Sara Eisen, because it was around five times that year’s revenue.

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Unilever was hot for Dollar Shave Club because it’s a disruptor. Selling to people via subscription means repeat purchases and more data: More than 50 percent of people who bought razors from DSC in the first three months of 2015 were still customers in April 2016, according to research company Slice Intelligence. “Guys who sign up, stick with the brand,” said Unilever’s President of Personal Care Alan Jope in an email to CNBC.

Asked how it justified that $1 billion price tag, Unilever responded in an email to CNBC that it did not disclose terms of the deal, but Jope said that Dollar Shave Club is “an authentic brand with a unique offering, not just in shaving, but across the entire male grooming portfolio.”

“I think there's a lot about studying improv that can help you in business.”
Michael Dubin
“We were ridiculed for thinking that we could ship a razor that would be liked by consumers. We were eventually sued. And then we were copied.”
David Pakman, partner in Dollar Shave Club investor Venrock

Dollar Shave Club had the might of Gillette to contend with, the brand that Unilever rival Procter and Gamble bought for $57 billion back in 2005, but investor David Pakman was confident that Dubin could do it. “The numbers told an incredible story. $7 million in revenue the first year ... $20 million in revenue the second year. And the consumer love for the brand was off the charts, right? So to me, it felt obvious,” he said.

But Pakman, a partner at venture capitalist Venrock, added that it was not an easy company to finance. “(A) bunch of people passed and some didn’t even take the meeting. And the Series B round, we didn’t get any leads for,” he said.

Pakman had such faith in Dubin because he saw DSC as operating an entirely new business model, one that had the power to disrupt the incumbent. “He intuitively understood how to use content and conversation as marketing at a time when legacy brands were still shouting at their customers with TV ads, purchased without actually knowing their customers,” Pakman wrote on his blog just after the sale to Unilever was announced in July 2016.

Share of US online sales: February 2017
Dollar Shave Club
Source: Slice Intelligence
Dollar Shave Club sales revenues
$4 million
$19 million
$65 million
$120 million
$200 million
Source: Dollar Shave Club

DSC fitted Venrock’s investment strategy because it has “very high” profit margins; is in a “zero-sum market,” where people switch from a competitor; and is in a category where incumbents “sell only through retailers and have no direct relationship with their actual customers,” Pakman added.

But success in an upstart business often means a strong reaction from the dominant brand, Pakman told “The Brave Ones”. “We were dismissed early on as inconsequential in the market. We were ridiculed for thinking that we could ship a razor that would be liked by consumers. We were eventually sued. And then we were copied.”

In December 2015, Gillette filed a lawsuit against DSC for patent infringement, including for a blade coating used on some of its razors, but that didn’t stop DSC from overtaking it in online sales.

Each brand had a third of the U.S. market in June 2014, and by August that year DSC had overtaken its P&G rival, according to Slice Intelligence. As of February 2017, Dubin’s company had grown to 47.3 percent of the online market, more than double Gillette’s 23.1 percent. But the rivalry is hotting up: In May, Gillette announced an on-demand razor service where customers text to order, after launching its own online shaving club in June 2015, while the upscale Harry’s shaving club now has 12 percent of the online shaving market in the U.S. So will Unilever’s big bet pay off?

“The commentary was on ‘Unilever goes into shaving.’ No, ‘Unilever goes into subscription selling’ is what the headline should have been.”
Keith Weed, chief marketing officer, Unilever

When we bought the Dollar Shave Club, the commentary was on ‘Unilever goes into shaving.’ No, ‘Unilever goes into subscription selling,’ is what the headline should have been,” Unilever’s Chief Marketing Officer Keith Weed told CNBC earlier this year.

“E-commerce and the use of data to better target people, particularly around subscription selling, (and generating) enduring incomes from (a) ‘continue to buy’ (business model) is a very interesting model,” he added.

Selling directly to people is “a bright light in an otherwise dark digital world for these manufacturers,” especially in the face of services such as Amazon Prime, according to Ted Schadler, a principal analyst at Forrester.

“It’s a reminder to all our brands that the people who buy our products should always come first and be the focus of what we do.”
Alan Jope, president of personal care, Unilever

Unilever knows that it has to keep up with digital trends to survive, and launched its “Connected 4 Growth” program last year in the face of lower growth rates and more disruptive competitors. It has taken “valuable lessons” from DSC, its 2016 annual report states, especially when it comes to innovation. Jope said that “Ripping up the rule book and learning new business models,” is one of the key things the company is learning from DSC, as well as its focus on customer service: It sent razors to a guy out of a job while he was interviewing. “It’s a reminder to all our brands that the people who buy our products should always come first and be the focus of what we do,” Jope added.

Yet while people might be happy to get a delivery of razors each month, they might not feel the same about other grooming products, said Schadler. He expects Unilever to expand the categories it sells in this way, but thinks it will be “very hard” to do.

DSC already sells other products including shaving balms, shampoos and even $4 toilet wipes (launched, of course, with a video featuring Dubin on the toilet), but the razor blades make up 78 percent of revenues, according to Slice Intelligence.

While Unilever and DSC won’t say where in the world they want to go next (as well as the U.S., the brand has small operations in Canada and Australia,) Brazil is the second largest razor market outside the States with $5.6 billion in sales, according to Euromonitor. The U.K. is also a major market for razors ($2.4 billion in annual sales) and is where Korean company Dorco, which supplies DSC, has already launched a subscription service.

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As for Dubin’s future? Unilever would be wise to keep him on side, said Alfred DuPuy, an executive director at consultancy Interbrand. “He’s been the face of this thing for four or five years, whether on (CNBC show) Squawk Box or on a video, letting lose the appropriate expletives … If I’m the CEO of Unilever, I’d want him to be around for a long time,” he told CNBC by phone.

But as in his school days, it’s Dubin’s mom Nancy who probably knows best. “From the day one, when he knew this was a success, he said: ‘This is not what I'm gonna do for the rest of my life.’ He’s too interested in too many things that he doesn't know what those things are yet.”

Disclosure: ComCast Ventures was a series B funder of Dollar Shave Club. ComCast Ventures is part of ComCast, parent company of NBC Universal and


Writer: Lucy Handley
Design and code: Bryn Bache
Editor: Matt Clinch
Executive producer, The Brave Ones: Betsy Alexander
Producer, The Brave Ones: Scott Stern
Images: CNBC and Getty Images