Unilever In Talks To Buy Alba's Honest

Unilever is in talks to acquire Honest Co., the consumer-products retailer co-founded by actress Jessica Alba, according to people familiar with the matter.

Unilever, maker of Dove soaps and Axe body sprays, is discussing a deal valued at over $1 billion but significantly less than the $1.7 billion valuation that was placed on Honest in a fundraising round last year, the people said. The talks are at an early stage, and Honest hasn't ruled out going for an initial public offering instead, one of the people said.

Honest has raised more than $200 million from outside investors since the Santa Monica, Calif., company's founding in 2011, according to FactSet data. Those investors include venture-capital firms General Catalyst Partners and Lightspeed Venture Partners as well as money managers Fidelity Management & Research Co. and Wellington Management Co. In the event of a sale, Honest has pledged to pay some investors double their investment.

The company generates roughly $300 million in annual revenue, one of the people familiar said. It sells disposable baby diapers, household cleaners, personal-care and beauty products and has built a loyal following among young mothers. Many consumers buy directly from its website via monthly subscription services. Some items are also sold at brick-and-mortar retailers including Target  and Whole Foods Markets.

Acquiring Honest would give Unilever a foothold in the fast-growing market for "natural" or "green" cleaning products, as well as the diaper business. Honest's business model could give Unilever more insight into shopper behavior, but risks alienating traditional retailers that carry its goods.

Unilever sells packaged food, household and personal-care products globally, but in the U.S. it doesn't compete with Honest in many product categories. It sold its North American laundry detergent business for $1.45 billion to a private-equity firm in 2008, and in recent years has expanded in U.S. hair- and skin-care products

Honest has challenged giants such as Procter & Gamble and Clorox with promises to avoid harsh chemicals found in many mainstream products. However, a Wall Street Journal investigation earlier this year found Honest's laundry detergent contained sodium lauryl sulfate, or SLS, one of the ingredients it pledged to avoid. Honest disputed the findings of two independent lab tests and said its own testing didn't find SLS.

For Unilever, an acquisition of Honest would be its second recent purchase of a California e-commerce consumer products company. In August, it paid $1 billion to acquire Dollar Shave Club, a premium to the $615 million valuation that company fetched a year earlier. The fast-growing but unprofitable startup provides a mail-order service that ships disposable razors for a flat monthly fee.

There have been a string of high-profile startups, including Jet.com and Dollar Shave Club, that have recently decided to sell to established corporations as the IPO market cooled and investors insisted that startups operate in the black.

Write to Serena Ng at serena.ng@wsj.com and Sharon Terlep at sharon.terlep@wsj.com