Hello Bello built its own diaper factory to escape supplier prices — and went bankrupt

Hello Bello, the baby-care brand founded in 2019 by actors Kristen Bell and Dax Shepard, was once the leading DTC subscription diaper brand in the US, selling via its own channels plus Walmart; retail was about 60% of revenue, DTC 40%, and diapers roughly 67% of FY2022 revenue. Production depended on a single third-party manufacturer, Irving, which began raising rates in 2021: diaper production prices rose over 18% while retailers such as Walmart and Amazon would not accept increases above 10%, per CEO Erica Buxton's court documents.

The answer was Hello Bello's own manufacturing facility in Texas. Benefits came too late: COVID-19 restrictions blocked travel to oversee installation and approvals took significant time, so the first production line delivered in summer 2021 was not assembled and approved until six months later, and the brand struggled to staff the plant without consistent hours, driving turnover. While the lines were coming up, it kept buying from Irving and pre-purchasing inventory up to a year ahead — front-loading warehouses of excess inventory without the anticipated sales.

In October 2023 the brand filed Chapter 11 to facilitate acquisition by private equity firm Hildred Capital Management, whose stalking-horse bid of about $65 million was subject to higher offers. For the fiscal year ending January 31, 2023, Hello Bello booked about $179 million in sales with negative EBITDA of roughly $15 million; cost cuts — a 20% cut in corporate staff, a scaled-back international footprint, more DTC shipping fees — did not close the gap, and operations ran on about $47 million in DIP financing, including up to $12 million in new money.

Chapter 11 in October 2023 with assets and liabilities of at least $100M each, negative EBITDA of about $15M on $179M sales, and a $65M stalking-horse bid

It was caught between a supplier raising prices over 18% and retail giants capping accepted increases at 10%, with no pricing power of its own.

The Texas factory's savings arrived years late: COVID travel restrictions and approval processes delayed the first line by six months, and staffing churn slowed the ramp further.

During the ramp it kept paying Irving while pre-purchasing up to a year of inventory, front-loading cash costs into warehouses of unsold stock.

The realized savings were tiny against the burn: about five cents per diaper, versus roughly $15 million in negative EBITDA.

Vertical integration only pays after the ramp; funding a factory while still paying the supplier you are escaping turns a margin problem into a cash crisis.

CEO Erica Buxton estimated the facility could cut manufacturing costs by 25% at maximum capacity, with total cash savings of up to $54 million — but the brand only began realizing some benefits around the bankruptcy filing. The Hildred Capital Management deal, expected to conclude within a few months, was subject to higher or better offers, with operations funded in the interim by about $47 million in DIP financing.