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March 09, 2020

Promo Industry Struggles Over Sanitizer Demand

Vendors are trying to fill orders, while distributors experience order delays, price increases and angry end-buyers.

By  Sara Lavenduski

Demand for branded hand sanitizer in the midst of coronavirus frenzy is causing major headaches as end-buyers request large quantities, distributors scramble to source enough inventory and suppliers struggle to keep up.

Nicole McNamee, the Memphis-based managing director of global accounts for Top 40 distributor Boundless (asi/143717), told Counselor that a cruise line client ordered a million pieces of sanitizer last week. It was a tall order, and McNamee tried to figure out how she could manage it. She assumed she could buy all the domestic supply from one supplier and then go elsewhere to make up the rest.

Hand Sanitizer

When she quickly realized vendors wouldn’t be able or willing to sell one client a million pieces of an item in such high demand at the moment, she sent quote requests to two major industry suppliers requesting 400,000 pieces between the two of them, and was offered better than EQP pricing in return.

But after she talked to the client and finalized the POs, things took a turn. One supplier put a cap on the amount she could purchase; another said she could buy out their stock, but the pricing would be at EQP, not lower as she had previously been quoted.

“I’ve never had a supplier not honor a quote,” McNamee said. “If I misquote a customer, I eat it. But I know they’re trying to please as many people as possible. They’d rather risk making one client (me) angry than 100 clients, among them Starbucks, Microsoft and the government.”

But the cruise line wasn’t concerned with the supply chain issue, just the increased price. They even offered to buy them blank, but they still needed a label printed with FDA regulations. “My customer said, ‘How can we trust you now?’ ” McNamee said. “So, neither my cruise client nor one of my hospital clients got nearly as many as they needed.”

There’ve been similar complaints in industry forums online this past week. Distributors called the doubling of prices “price gouging at its best” and lamented that suppliers weren’t honoring pricing — in some cases doubling it — on the same day distributors sent in their PO. Others asked if their peers had any luck finding “honest” suppliers with inventory, which seemed to be changing by the hour.

In response to a letter on the coronavirus situation sent to the industry on March 6 by ASI President and CEO Tim Andrews, one distributor said it was “disturbing” and “disappointing” that suppliers weren’t honoring their pricing and weren’t updating pricing on their websites.

Counselor reached out to several suppliers requesting more details on the situation. As of March 6, top 40 supplier Snugz/USA (asi/88060) couldn't offer rushes under five days on sanitizer, but wasn't limiting quantities on most orders (though massive requests may be subject to caps) and not changing prices at will.

“If our price does go up, it’s because our cost of goods sold has increased due to buying bottles and raws at a higher price,” CEO Brandon Mackay said. “For example, we moved pennies on two larger pump-style bottles (and not after the order was received) only due to the fact we had to pay more for these specific pumps. I’ve heard that there is some price gouging and it's unfortunate that some are taking advantage of this situation.”

This week, however, Snugz announced that due to high demand, they wouldn't be taking any new sanitizer orders until further notice.

It’s the same situation at Tekweld (asi/90807), which isn’t committing to any more sanitizer orders at this time. “We normally have five months of inventory of all our products on hand at one time, and probably more of sanitizer,” said Ray Rodriguez, vice president of sales & marketing. “We blew through all the sanitizer in two and a half days. We usually get 350 calls a day, and now we’re getting between 1,500 and 1,600 and our order sizes have tripled. We’re a day a half behind in order processing. And of course, not every order is for sanitizer, so sanitizer is bogging down the processing for those. It’s just been a perfect storm.”

The cancellation of shows and events is going to impact this industry in a big way, said Rodriguez, who added to distributors: “Please be patient. We’re working as hard as we can to process these orders.”

Raining Rose (asi/80489) may soon be out of sanitizer, though they continue to receive materials for production. They’ve brought in additional personnel solely to help keep up with orders, requests and questions, and they’re currently working to expedite production of USA-made items so they can restock more quickly, said Lindsey Davis, director of promotional sales.

“We discontinued rush service, but we haven’t increased our production time or our prices,” said Davis. “We’re still offering the same five-day standard service, which I don’t anticipate changing at this time. We’re not limiting quantities per customer if they have a PO, but we have turned down requests from a few larger players that wanted to buy out our inventory and use it as needed. We work with thousands of distributors, and we want to offer fair support to as many as we possibly can.”

Last week, Top 40 supplier BIC Graphic (asi/40480) had to extend lead times on sanitizer because of the demand volume. Now, the company isn’t taking any new sanitizer orders until further notice.

“On Friday, March 6, we had to temporarily suspend availability on all our hand sanitizer items,” marketing and communication manager Carrie Lewis said. “Prior to that, we didn’t limit quantities, any large orders were processed by our custom quoting team, and we didn’t experience price changes with our supplier or change pricing for our customers.” For now, BIC is fulfilling any orders already in the processing system; fortunately, most of them are manufactured domestically. “We’re evaluating daily as to when we can resume normal production,” Lewis said.

On March 10, ASI's editors received an email announcement from Top 40 supplier Ariel Premium Supply (asi/36730) stating that they're no longer taking sanitizer orders and that it will take a few days to update inventory numbers, as well as from Tempo Industries (asi/90859) that stated they were out of sanitizer and expected more inventory in a few weeks.

Josh White, senior vice president of strategic partnerships at Top 40 distributor BAMKO (asi/131431), told Counselor that the issue stems from outdated order processes, in which "massive inefficiency" leads to "miscommunication."

"The situation has revealed the flaws in supplier order receipt systems that are well past due to be streamlined with current technology," he said. "There are way too many touchpoints and variables between the time when a distributor gets a bid from a customer and when the PO confirmation is sent by a supplier. The future of this industry will be a single, closed-loop process that goes from client inquiry to supplier confirmation in seconds with the click of a button."

Meanwhile, Chocolate Inn/Lanco (asi/44900) has alternatives to bottled sanitizer, including antiseptic wipes; in several days, they'll have single-use gel packets in two different sizes. 

"We expect a very favorable reception," said marketing manager Nick Caputi. "Our team did a stellar job of adapting to the needs in the marketplace, and by looking ahead, we came up with solutions."

Coronavirus has certainly caused disruption in a myriad of areas, and for each supplier that can’t meet demand for sanitizer, distributors are often dealing with irate clients. “I’m not mad at the suppliers, and it’s not like I’m going to stop using them, but it’s been a tough week,” McNamee said. “I want to say to them, ‘Cruises are a big reason why we’re having this problem in the first place. Let’s do what we can to help.’"

This week, New York unveiled its own line of sanitizer, called “NYS Clean,” that’s made by inmates in the state’s correctional system. Governor Andrew Cuomo said approximately 100,000 gallons of the sanitizer would be delivered each day to schools, not-for-profits and government agencies.

The state is warning consumers to be aware of price-gouging and scammers promising cure-alls; televangelist James Bakker was issued a cease-and-desist letter by the New York attorney general after using his TV program to advertise his Silver Solution products as treatment for coronavirus.