Brand Post-Mortem: Hello Bello

I don’t know about you, but sometimes I get tired of all the business podcasts being centered around success. Yes, it’s inspirational and helpful to hear success stories and better understand how a company scaled from zero to exit, but is it more helpful to better understand failure and why something no longer exists?

I wish there was a podcast or newsletter dedicated to failure. I think it’s immensely more powerful and useful to understand what went wrong and try to avoid that rather than what went right and try to emulate that.

So, in the spirit of understanding that most of us are likely to fail instead of succeed, I wanted to do a brand post-mortem, because, unlike Thanos, we embrace failure here (I am so sorry for the forced Marvel reference).

So for our first brand post-mortem, let’s dive into Hello Bello, the celebrity diaper brand that took off over the past four years, but filed for bankruptcy in 2023.

Celebrity brands have been having a moment for what seems like a decade now, but every brand isn’t Teremana or Casamigos, where they have had or are on track for billion-dollar-plus exits, most of these brands like most other brands, fail. They fail for a lot of the same reasons that non-celebrity brands fail, just on a more public stage.

Anyone who knows me or has been reading On-Shelf understands that I think community building is a core pillar for success and a lot of the times the only thing that a celebrity founder guarantees is a head start in building that community.

The other thing to flag when it comes to celebrity-owned brands is that the consumer is much smarter than they were even a decade ago. You can’t just have a celebrity who sponsors or endorses your product every once in a while and call it a celebrity-backed brand, you need the consumer to feel like that celebrity is in the trenches and building this brand daily.

With that, let’s dive into Hello Bello what might have gone wrong, and what could help in their comeback.

Hello Bello is a premium baby brand focusing primarily on diapers, but also offering other baby and kids products like personal care items and vitamins. The brand was founded by celebrity couple Dax Shepard and Kristin Bell while being run by CEO Erica Buxton.

A premium baby brand checks off a lot of boxes. It has the potential to be a high-margin item, you have a devoted and non-price sensitive consumer in moms, and the brand did have a true celebrity/brand fit when it came to this likable couple and their passion to make a better baby brand.

You can watch this TV spot below and see how organic the fit was and you truly feel the passion Kristen Bell has for this company and its mission.

We all know brands and products can be perfect, but certain categories can doom you. For the sake of this post, I am going to stick with diapers as the category, since that was their core product offering.

Diapers are a $82B+ industry worldwide, all parents need them and we go through a lot of them (I just changed one not 10 minutes ago). Although there are multiple consumer brands in the market nine out of the top ten brands are owned by either Kimberly-Clark or Procter & Gamble. So, we are going into a market where there is already an established duopoly.

This can be perceived in two ways, hardened veterans of the industry, would see this as an awful category that is already completely saturated by two behemoths. The other way is to view it through a startup founder lense where you see an industry that hasn’t been disrupted in forever, you see millennials having kids and looking for better brands, and you think we can be the Olipop, Liquid Death, or Annie’s of diapers. I get both perspectives.

My personal feeling as a parent, when you go through 2,200 diapers a year on average, that cost and a trusted brand are bigger drivers in purchasing habits compared to most other categories. I want it to be cheap and I want it to work, and once I start buying one brand for my first child, I will most likely come back to it for the rest in the future. I think sustainability is probably the best wedge into the market here from a positioning standpoint, but I still don’t know how it would ever supersede price or trust in the brand. Still, even with this uphill battle, the brand crushed it out of the gates.

When it came to sales the brand had an omnichannel approach with 60% of its business coming from retail and the rest online. The company boomed during the pandemic as diapers became in short supply. We all remember fighting over toilet paper, but I remember also being concerned about diapers for my firstborn at the time. True story, on one of the first grocery store visits I went on during the pandemic, I encountered a man wearing a diaper as a mask, an image I will never forget.

At its peak, the brand did $179 million in sales but lost $15 million annually on that number. CPG is an expensive game as we all know, but it seems from everything out there that the main issue for Hello Bello was supply chain management. According to Retail Dive, they had one manufacturing partner, and that partner started to increase costs toward the end of the pandemic and this trickle-down effect on their price on the shelf could not be sustained.

The CEO outlined that the price increase was over 18% which caused them to increase pricing by 10% and ultimately this was rejected by their key retail partners.

Owned manufacturing vs. co-packers is a whole On-Shelf month-long issue on its own, but for this issue, I will say that having backup manufacturers is critical, and even when you find the right partner that doesn’t mean you stop looking for others.

It’s similar to raising capital. The best time to raise is when you don’t need the money. The worst time to find a second manufacturer is when you need it.

Hello Bello ended up combatting this by opening their own facility, but the ramp-up period to getting it fully operational made it difficult to reap the benefits that they are now starting to see post-bankruptcy.

There were a host of other manufacturer issues that have been outlined in multiple pieces, but all of this led to the brand filing for bankruptcy in 2023.

Luckily, bankruptcy doesn’t always mean the death of a brand, especially one that has that much total revenue.

The company ended up being acquired for $64M by a private equity firm, Hildred Capital and it looks like a lot of the existing team is still in place as they gear up for their second act.

Wait, so this isn’t a post-mortem, it’s a back-from-dead story?

The bankruptcy clears the deck for this brand and the acquisition gives them a capital partner who can support the brand. Outside of the bad publicity of a bankruptcy, as a consumer, who didn’t hear about the news, their perspective remains the same. You can check out Hello Bello’s massive Instagram to see how the brand has continued to push along as business as usual from a consumer standpoint.

Looking at this company compared to the category, I have more doubts about the category being viable than the company. I think the company, especially now with their own manufacturing in place can exceed sales from their peak and have a successful second outcome, but the category is just so tough when assessing the ceiling for this brand. If you look at The Honest Company and its journey post-IPO, it is bleak compared to the rise the brand had as a private company.

I think the biggest lesson from Hello Bello, from the information that is public, is being mindful of your manufacturing partnerships and the risk a brand incurs when they are dependent on one manufacturer especially if it is a co-packer.

I will be rooting for the brand from the sidelines and I am glad that our first brand post-mortem issue ended up being a zombie because I do think this is a brand that executed their celebrity backing correctly and made a great product.

Hopefully, in the new year, we can embrace failure, ditch the faux “crushing it” LinkedIn posts, and learn not only from our mistakes but from others as well.