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Companies making hand sanitizer stuck with millions of dollars of product

Sanitizer stockpiling was historic. Now, manufacturers are s...
Underhanded Messiness
  09/16/21
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Underhanded Messiness
  09/16/21


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Date: September 16th, 2021 8:09 PM
Author: Underhanded Messiness

Sanitizer stockpiling was historic. Now, manufacturers are stuck with millions of dollars of product

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Carolyn Said

Sep. 16, 2021

Updated: Sep. 16, 2021 3:17 p.m.

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Employees work at the EO factory in San Rafael, in March 2020. They saw the need for their product grow by over 1,000% in the previous month.

Employees work at the EO factory in San Rafael, in March 2020. They saw the need for their product grow by over 1,000% in the previous month.

Gabrielle Lurie/The Chronicle 2020

When the pandemic hit and clean hands became a national obsession, EO Products and Seven Stills were ready.

San Rafael’s EO Products already made hand sanitizer, among other organic body and skin care products. San Francisco’s Seven Stills, a restaurant and distillery, had the know-how, the equipment and the contacts to make alcohol products.

Both companies swung into action, pumping out gallons of hand sanitizer at a time when panicked consumers were stripping store shelves bare of the pungent product. And eventually when the world was awash in sanitizer, both were left holding the bag — or rather gargantuan supplies of the liquid disinfectant.

The saga of the two Bay Area firms encapsulates a boom-and-bust cycle triggered by the pandemic.

“Consumers stocked up on the basics during the peak pandemic purchasing period in spring 2020, and hand sanitizer performed exceptionally well as it was deemed the newest everyday essential,” said Tara James Taylor, senior vice president of beauty and personal care for research firm Nielsen.

Nielsen data shows a stunning sevenfold increase in U.S. retail sales of hand sanitizer in 2020, far outpacing the pandemic’s other big commodity, toilet paper, which was up only 20%. That doesn’t even include bulk sales to hospitals, government and businesses.

When the early shortages occurred, dozens of little companies jumped in to fill the gap. But soon giant players like Gojo Industries, which makes Purell, ramped up manufacturing dramatically.

And sanitizer sales slowed once people already had purchased lifetime supplies and as news emerged that the virus was not transmitted through surface contact. Sales have sagged even more in recent months.

“Once the U.S. vaccine rollout began in (early) 2021, shoppers started to ease up on purchasing hand sanitizer as they began to feel less threatened by the possibility of contracting COVID-19,” Taylor said.

While stocking up during crises is expected, “the stockpiling period witnessed in 2020 was unlike anything ever witnessed before,” Taylor said.

Tim Obert takes a bottle of hand sanitizer out of storage in San Francisco. When the pandemic hit, Seven Stills Brewery & Distillery started making hand sanitizer. But then big players ramped up and the bottom fell out of the market, leaving it with huge amounts of excess inventory.

Tim Obert takes a bottle of hand sanitizer out of storage in San Francisco. When the pandemic hit, Seven Stills Brewery & Distillery started making hand sanitizer. But then big players ramped up and the bottom fell out of the market, leaving it with huge amounts of excess inventory.

Scott Strazzante/The Chronicle

EO Products (the initials stand for “essential oils”) was already deeply into hand sanitizer before the viscous liquid became a national obsession.

EO, one of the nation’s largest independent organic body-care companies, makes shampoo, bodywash and lotion at a 45,000-square-foot space in Marin that George Lucas once used as a “Star Wars” studio.

Susan Griffin-Black, who founded the $80 million company in 1995 hand-pouring essential oils in a Potrero Hill garage with Brad Black, her then-husband, is still co-CEO with Black, although they are now divorced.

She said EO was the first company to make organic hand sanitizer in 2004, striving to produce a product that was healthy and enjoyable to use.

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Isopropyl alcohol, the main ingredient in sanitizer, is usually synthetic or uses genetically modified corn, “so it’s really harsh,” she said. “We use aloe, essential oil and organic sugar-based alcohol. It’s a very simple formula but it’s like the difference between Alice Waters’ vinaigrette and McDonald’s vinaigrette. It may be the same five or six ingredients but where they come from, how they are grown, processed and put together is a wholly different thing.”

In early 2020, Griffin-Black informally surveyed stores within 10 miles of her Mill Valley home — Whole Foods, Walgreens, Safeway, Mill Valley Markets — and found that none had any sanitizer in stock.

“It was making me crazy that local stores could be out of such an important thing” even while EO was producing it almost next door, she said. But EO’s supply chain was to ship its products by the pallet via distributors. So she got her employees to start making deliveries directly to local stores.

When the pandemic hit, EO’s factory converted to all hand sanitizer and hand soap, taking on extra staff and adding a third shift, while foregoing its usual shampoos and other products. EO also increased production of sanitizing wipes, but those are made by another company.

Seven Stills Brewery & Distillery's Tim Obert takes a bottle of hand sanitizer out of storage. When the pandemic hit, Seven Stills Brewery & Distillery pivoted to making hand sanitizer, since it had the know-how, equipment and connections. But then big players ramped up and the bottom fell out of the market, leaving it with huge amounts of excess inventory.

Seven Stills Brewery & Distillery’s Tim Obert takes a bottle of hand sanitizer out of storage. When the pandemic hit, Seven Stills Brewery & Distillery pivoted to making hand sanitizer, since it had the know-how, equipment and connections. But then big players ramped up and the bottom fell out of the market, leaving it with huge amounts of excess inventory.

Scott Strazzante/The Chronicle

At the peak it was making over 1 million 2-ounce bottles of hand sanitizer a month, ordering huge amounts of supplies.

In May this year, the market collapsed.

“No one wanted to hear the word ‘sanitizer’ because they had so much inventory,” Griffin-Black said. “The hand sanitizer market disappeared for months. It’s just starting to pick back up again as makers have donated, and stores have sold through all those opportunistic hand sanitizers that came into the marketplace to fill the gap.”

Now EO has had to add extra warehouse space to store $2.3 million worth of excess sanitizer packaging inventory, including 2 million bottles, 2 million pumps and sprayers, and hundreds of thousands of labels. It will take up to 18 months to work through it.

Still Griffin-Black doesn’t regret it.

“We felt like we had a job to do to help as many people as we could be safer,” she said. And there was a silver lining. “A lot of happy hand sanitizer customers met the brand for the first time,” Griffin-Black said. “That carried us to an increase the following year.”

An employee moves boxes of EO products that are ready to be shipped out of the EO factory in San Rafael in March 2020.

An employee moves boxes of EO products that are ready to be shipped out of the EO factory in San Rafael in March 2020.

Gabrielle Lurie/The Chronicle 2020

Seven Stills co-owner Tim Obert starting toying with the idea of making hand sanitizer because of the market shortage in early 2020 as panicked consumers stripped store shelves bare of sanitizer, toilet paper and other goods. He’d see reports that hospitals, charities and others couldn’t find any, and he felt bad about it.

“I started thinking, ‘Hand sanitizer is made from alcohol, and I have a distillery,’” he recalled. As an experiment, he started making some in a bucket for personal use. At that time the Centers for Disease Control and Prevention relaxed regulations to allow distilleries to produce sanitizer.

A local Kaiser Permanente health care center asked to order a couple of thousand bottles. He said, no problem, since he had a huge facility that had ground to a halt on its usual alcohol production. Then, he said, Kaiser escalated, putting him in touch with its national team which asked for 70,000 bottles.

“We were like, OMG, I don’t think we can, but we can start with 20,000,” he said. “We were from an idea to full force in a week. It was a trip.”

He brought back some of his 74 furloughed employees and started producing. He ordered a tanker truck full of 5,000 gallons of ethanol, enough to make 34,000 bottles of sanitizer. Seven Stills’ newly opened restaurant was shut down, so he cleared out all the tables and converted it into a hand sanitizer packaging facility.

“It was our restaurant servers and bartenders, showing up with masks and full Hazmat suits to bottle hand sanitizer for weeks,” he said. “It was crazy, we were trucking on container loads of plastic from China or India or wherever I could get it.”

Stills sold 20,000 bottles at wholesale cost to Kaiser, bringing in enough money to donate thousands of bottles to local nonprofits. Then it offered the product online. “It was nuts, all of a sudden people were buying $1,000 worth of hand sanitizer from our site,” he said.

Seven Stills Brewery & Distillery's manager Texas Enkil uses hand sanitizer in San Francisco.

Seven Stills Brewery & Distillery’s manager Texas Enkil uses hand sanitizer in San Francisco.

Scott Strazzante/The Chronicle

That first batch flew out the door, so he ordered another tanker truck of ethanol, along with 120,000 pump tops from China. He sold an additional 10,000 bottles to Kaiser.

By then it was June 2020 and the major manufacturers had ramped up their production. “All of a sudden it went from selling like hotcakes to you couldn’t give it away,” he said.

Meanwhile the restaurant and distillery, shut down by the pandemic, were in a financial hole. Eventually he had to liquidate his entire production facility, including selling palettes of hand sanitizer. “I had an extra 15,000 bottles and 90,000 pump tops sitting here taking up space; it was more expensive to store them than to sell” even at bargain-basement prices.

He’s saved two palettes (676 bottles each) of sanitizer in his storage facility.

“It’s nice to have,” he said. “We use it everywhere in the restaurant for cleaning hands and surfaces.”

(http://www.autoadmit.com/thread.php?thread_id=4923316&forum_id=2#43128417)



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Date: September 16th, 2021 10:42 PM
Author: Underhanded Messiness



(http://www.autoadmit.com/thread.php?thread_id=4923316&forum_id=2#43129280)