The inside story.
In April, Seventh Generation CEO John Replogle told Fortune that he loved that the eco-friendly household products company he runs was private. “We think long term,” he said, “and we’ve got to make better decisions for the long run, and being private helps us do that.”
At the time he meant it. “We had no intention of going public,” he told Fortune in an interview yesterday.
But in the spring, after Unilever reached out to him, Replogle started having informal conversations with the Dutch consumer goods giant about both companies’ purpose-driven operating principals. Seventh Generation is a B-corporation, a designation for companies that want to benefit society, and Unilever under current CEO Paul Polman has been stressing its social impact.
“We share those connections,” Replogle says. “It wasn’t about a transaction. It was more about a relationship.”
Replogle, who worked at Unilever for two and a half years in the mid-2000s, says the conversations evolved into talks of collaborating on a few initiatives. That advanced to conversations about an investment in early August, which led to an eventual non-binding offer. (Fortune reported yesterday that the deal is in the $600 million to $700 million range.)
Replogle says that Seventh Generation was not in discussion with any other big consumer packaged good companies. The management team will remain and continue to operate Seventh Generation as a semi-independent company out of Burlington, Vt. “One of the things they really wanted to do is not impact or change who we are,” Replogle says.
The setup is similar to Unilever’s UL relationship to Ben and Jerry’s, Seventh Generation’s Vermont neighbor, which Unilever acquired in 2000. After the acquisition, Unilever essentially left the ice cream maker alone. Some of Unilever’s other brands include Dove and Axe.
The deal gives Seventh Generation a “megaphone for our mission” of healthier products for people and the planet, Replogle says. It also gives the company, which does 95% of its business in North America, the potential to quickly expand globally. More scale could also help bring down the cost of producing its products. Right now the company generates about $250 million in revenue.
For Unilever, the tie-up gives it a well-established brand in the eco-friendly cleaning segment—an area consumer packaged goods giants have struggled to build from scratch. “A lot of large companies have tried unsuccessfully to create new brands but used old playbooks,” Replogle says. “Those tend not to resonate as well.”
According to a recent report by Nielsen, 40% of global consumers surveyed said they wanted environmentally friendly benefits from their cleaning products, and 36% said they don’t want harsh chemicals. The move toward eco-friendly ingredients in household goods follows a similar move within the food industry as consumers have increasingly sought out “natural” goods. Deals in the consumer goods industry has mostly mirrored the same progression as consumers’ habits: first shoppers tend to care most about what they eat, then what they put on their bodies (skincare), and finally what’s around them (cleaning products).
Replogle declined to comment on Honest Company, which the Wall Street Journal had previously reported as a Unilever acquisition target.