250 million.

That’s how many masks SanMar (asi/84863) produced for healthcare professionals as part of a contract with the federal government. It’s a jaw-dropping feat considering that the Issaquah, WA-based company had never made masks before the COVID-19 outbreak. Yet, the largest supplier in the industry, with an estimated $2.4 billion in revenue, was able to quickly redirect its manufacturing capabilities and serve its distributor customers at the height of the PPE frenzy.

“We as an industry don’t give ourselves enough credit for how we pivoted during this,” Jeremy Lott, president of SanMar and the number-one ranked member of the Counselor Power 50, told Tim Andrews, president and CEO of ASI, during a keynote interview at the ASI Digital Expo on Thursday, Feb. 4.

Jeremy Lott, president of SanMar

Referencing that distributor sales dropped, on average, by only 19.8% in 2020, Lott said that it showed promotional products firms’ tremendous resiliency considering how live events are the lifeblood of the industry. While traditionally reliable markets like sports have suffered, SanMar has shifted its strategy to producing comfortable, cozy apparel for people working from home. As a matter of fact, the company sold out of blankets while experiencing its best December ever.

“The need to connect with one another was so intense this past year,” Lott said. “And it’s been more important than ever to thank employees and clients. Our industry plays such a huge role in that.”

An industry pioneer regarding workplace culture, SanMar offered telecommuting long before working from home was trendy and government mandated. At one point, the office was 22 miles from downtown Seattle and five miles away from the last suburb. A beautiful but long drive, Lott said it was the number-one reason for turnover. As a result, the company launched a pilot program where long-term account executives were given the technology to work from home. Over time, other departments followed suit.

“We’ve been doing videoconferencing and group huddles long before COVID,” Lott said. “We do fun things, too, like painting a picture together, making meals and cocktails, happy hours, activities to maintain that sense of camaraderie.”

Jeremy Lott of @sanmar_corp dropping some knowledge bombs about supply chain & the shortages everyone is facing. I learned that there is a container shortage and that contract rates for boat are getting pushed for inflated rates so bigger importers are suffering more. https://t.co/vTaYE7ffkU

— Jeremy Picker (@JWPicker) February 4, 2021

Of course, SanMar faced its share of challenges over the past year, including a few employees passing away from COVID-19. Fortunately, nobody at SanMar was laid off, but hours were cut and salaries were reduced until business improved in the summer. Lott halted recruiting efforts in order to maintain budget, but as orders picked back up again, he realized how short-staffed the company was. “At one point, there were 80 people in one warehouse out on some sort of leave due to COVID,” Lott said.

And then there’s the current industry-wide issue of skyrocketing shipping container costs, rising raw material prices, reduced shipping capacity and logjammed ports. SanMar has attempted to overcome these hurdles by expanding its sourcing to over 20 countries after the United States’ tariff war with China, but shipping remains “very significantly challenged.”

“We have a fantastic relationship with UPS where they didn’t put a cap on our shipments, but COVID has thrown global supply chains out of balance,” Lott said. “There’s a container shortage and spot rates are being inflated to five or six times what our contracted rate is.”

Cybersecurity has been another concern after malware attacks have crippled some of the biggest promo companies over the past few years. Lott credited Norm Hullinger, CEO of Top 40 supplier alphabroder (asi/34063), for discussing his company’s cyberattack at the ASI Power Summit in 2019 and inspiring Lott to beef up SanMar’s cyber insurance.

Live on the Keynote Stage of #ASIDigitalExpo with @sanmar_corp President/CEO Jeremy Lott. Register and jump in as we discuss numerous #promo industry issues, from WFH to shipping woes and price hikes, and field your questions. https://t.co/S00ay9hT2e pic.twitter.com/jP4qY5Z13T

— Timothy M. Andrews (@Tim_Andrews_ASI) February 4, 2021

Even though the company does a lot of internal training on cybersecurity, Lott was tricked last year into clicking a link in an email that was pinging Bulgaria. His team immediately took his computer off network and recycled it. “You have to have personal vigilance and the right things in place in case you click on an email you shouldn’t have,” Lott said. “Ransomware is truly a business for these criminal gangs.”

Looking ahead to the rest of 2021, Lott is optimistic for SanMar, as well as the rest of the industry. Although he doesn’t anticipate PPE will be the lifesaver it was last year – where it accounted for $6 billion in revenue and 29% of all industry sales, according to ASI data – Lott believes that masks will remain in the industry as a small product category. The healthcare market still holds plenty of potential, though, as earlier this week SanMar announced a partnership with scrubs manufacturer WonderWink. “Nursing homes, senior clinics, dentist offices, even mobile pet grooming clinics are more and more wearing scrubs and many want them decorated,” Lott said. “It was a market growing dramatically pre-COVID and now COVID has accelerated that growth.”

Lott hasn’t given up on the sports market, either. SanMar is planning inventories in anticipation of high school and youth sports coming back in a significant way by the fall. “I’m bullish on it coming back,” Lott said. “I know how important youth sports are to my kids. We’re missing the connection and community that sports bring.”

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