How Jessica Alba created a $1 billion empire

ACTION flicks and a cult TV show made her a household name, but Jessica Alba forged an $1 billion empire from nappies and soaps. How did she do it?

FROM Dark Angel to billion-dollar businesswoman: Jessica Alba’s is a different kind of Hollywood success story.

The actor-turned-entrepreneur has joined the ranks of Forbes’ wealthiest self-made women — alongside Madonna and Oprah Winfrey — with her toxin-free The Honest Company last year valued at $2.2 billion ($1.7 billion).

Alba, known for her roles in the Fantastic Four and Spy Kids movie franchises, is reportedly in talks with Unilever over a potential $1.2 billion ($US1 billion) deal to buy the company she started five years ago, selling toxin-free household goods, diapers, and body care products.

The 35-year-old reportedly owns between 15 and 20 per cent of the tech company “unicorn”, placing her stake in the business at about $264 million ($US200 million). Alba’s net worth, according to Forbes, is $449 million ($US340 million).

So how did the actor, who became a household name as a 19-year-old cult television star in the 2000s, go from sex symbol and action movie staple to one of the world’s most successful businesswomen?

According to director James Cameron, who cast her in the Dark Angel series, Alba was always destined for greater things.

“If you went back to the day I met Jessica and told me, ‘This girl is going to build a billion-dollar company,’ I would’ve said, ‘I believe it,’” Cameron told Vanity Fair.

“She was slumped over with her hair in her face and a look of defiance. But when the camera hit her — wham! — there was such punk attitude.”

The Honest Company was born out of Alba’s concern about product safety. Picture: David Aguilera

The story behind the The Honest Company goes like this. In 2008, Alba married Cash Warren and held a baby shower for the first of their two daughters, Honor and Haven.

Having being plagued with allergy and asthma-related health complaints throughout her own childhood, Alba was horrified when she broke out in a rash after washing a new onesie she’d been given in what she thought was a mild detergent.

So began a determination to find safe, non-toxic products for concerned parents like herself — a passion that took her to the US Congress where she lobbied for changes to federal regulation of hazardous chemicals in household products.

Alba’s venture tapped into the needs of a generation of parents more concerned than ever before about product safety.

In 2012, The Honest Company started selling non-toxic nappies and wipes, turning over $13 million ($US10 million) in its first year of sales. It now boasts 135 products from vitamins to toothpaste, with an 86-piece beauty line on the side, boosting annual revenue to $396 million ($US300 million).

Alba got her start on Dark Angel.

Self made woman.

While Alba’s star power has no doubt given the brand a boost, with her Instagram followers tipping 8.8 million, The Honest Company’s success rests on solid financial grounding.

According to American business guru Marcus Lemonis, the key to its success lies in the comparatively dry and boring area of product sourcing and pricing.

“[Alba] really knew where to go out and find the product — not only give the margin to herself, but give it to the retailer,” Lemonis told CNBC.

“Consumer products, whether it’s this foam or a bottle of cleaner, it’s all based on the retail price, is all based on the sourcing ... The product goes from the cost of a dollar, it keystones, which means it doubles the margin to $2, and then sells to the consumer for $4.

“Because she was able to source properly, her keystoning from her to the retailer, the retailer to the consumer stayed at or below market.”

Alba is by all accounts a hands-on businesswoman, putting in long hours and not afraid to get her hands dirty while overseeing the brand’s marketing and product development.

Her business partner and The Honest Company chief executive, ex-lawyer Brian Lee, takes care of the bean counting side of things.

“I’m very creative, I’m a dreamer,” Alba told The Hollywood Reporter, while recounting her four-year search for a collaborator. “I’m practical, but I think big. I’m not a businessperson. I’m terrible at math.”

Alba, pictured with husband Cash Warren, left, is a shrewd businesswoman. Picture: Rob Kim

A major challenge came when The Honest Company was sued last year over the effectiveness of its sunscreen, followed by a string of legal actions questioning the safety of ingredients in its infant formula, shampoo and body wash.

The company has stood by its ingredients, which are FDA approved, and plans to run education sessions around how to stay sun safe.

Alba has reportedly clashed with fellow celeb-turned-lifestyle-entrepreneur Gwyneth Paltrow, sparking a war of words with the Goop founder when she told a journalist: “I didn’t grow up with a bunch of money, so my tips are much more grounded.”

Paltrow was reportedly overheard calling Alba a “hypocrite”, and followed up with a Goop newsletter questioning the safety of The Honest Company’s cleaning products.

But the spat has done little to dampen the runaway success of the The Honest Company, or the interest from potential buyers like Unilever - the global packaged food, household and personal-care products behemoth - which owns brands including Ponds, Dove, Lux, Omo, Rexona, Lynx and Jif.

What direction the company would take under the ownership of a multinational remains to be seen. If one thing’s sure, it’s that Alba will take whatever challenges lie ahead in her stride, with her trademark billion-dollar smile.

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Originally published as How Jessica Alba created a $1 billion empire