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Jessica Alba’s Honest Company is contemplating a CEO change

The discussions come as Honest realizes it is a consumer-packaged goods company, not an e-commerce startup.

The New York Times 2014 DealBook Conference
Honest Company co-founder Jessica Alba with CEO Brian Lee
Thos Robinson/Getty Images for New York Times
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

Honest Company, the maker of baby and beauty products co-founded by actress Jessica Alba, is overhauling its management team in a shake-up that could result in a CEO change, multiple sources told Recode.

The company’s board of directors has been talking to top executives from consumer-packaged goods companies to discuss roles on its management team and board. Some of those interviewed have said they would only be interested in joining the company as CEO — a move the board would consider for the right person, sources said. It’s not clear if a decision is imminent or if a CEO change will be made.

Honest’s long-time CEO Brian Lee told Recode on Wednesday, “I’m CEO and I’ll continue to be CEO.” But when pressed about the discussions with outside execs who could be interested in his job, Lee said, “We’re always looking to do what’s best for the company.”

The talks come after perhaps the most turbulent year in Honest’s young life. The five-year-old company, which makes diapers, shampoos and cleaning products that it markets as non-toxic, hired bankers to explore an IPO but eventually put those plans on hold.

It then held acquisition talks with CPG titan Unilever and others, only to see Unilever acquire another environmentally friendly company, Seventh Generation, instead — a development that sources say blindsided CEO Brian Lee.

In the interview on Wednesday, Lee called such a description of his reaction an “overstatement,” but confirmed for the first time publicly that the companies held talks.

“There was a deal to be had,” he said.

As for why it fell apart, Lee added, “We couldn’t come to a correct structure and correct value and correct partnership.” Honest Company’s last round of financing valued the company at a reported $1.7 billion, which sources said has been a roadblock in potential deals. Lee declined further comment on the topic.

In the wake of the failed sale, the company has overhauled its management team in an attempt to bring in people more experienced in developing and marketing products to be sold in physical retail stores.

Honest Company began by selling subscriptions of diaper bundles through its website, but it is betting that future growth will come more from brick-and-mortar retail, where it has already had some success selling in chains like Target and Whole Foods, than e-commerce. Between 80 percent and 90 percent of commerce still happens in physical stores.

“In light of these [acquisition talks], we started realizing what it takes to become a world-class CPG organization with world-class products,” Lee said.

The company announced in December that it was cutting 80 jobs and that President Sean Kane, as well as CFO and COO David Parker, were leaving the company.

Recode has since learned that Chief Technology Officer Oleg Pylnev left late last year for a role at SpaceX, according to his LinkedIn bio, and Honest has also parted ways with Chief Marketing Officer Chris Thorne.

Lee said the CTO job has been folded into an existing chief digital officer role at the company. And Alba, the co-founder, is becoming more involved in brand marketing, he said.

Lee himself is an entrepreneur more familiar with digital companies than legacy retail. Before he co-founded Honest Company, he was a founder of online legal services company LegalZoom and online shoe seller ShoeDazzle.

In 2015, Lee also helped start Hollar, a startup that is essentially building the online version of a dollar store. Hollar has raised nearly $50 million in venture capital and Lee sits on its board.

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