As sanitizer craze fades, distilleries look ahead

When the coronavirus pandemic shuttered bars in March, Delaware’s small circle of distilleries saw hand sanitizer as a community service and a financial lifeline for a short window of time.

At the height of the pandemic, Zack King of EasySpeak Spirits in Milford used ethanol on hand to make sanitizer in three sizes.In the first weeks, they planned to give away 150 to 250-milliliter bottles with takeout food orders. By the end of March, they had sold more than 300 gallons.

“Every day we had to figure out how much we had on hand and how much we could produce,” King said. “It would get to the point where someone would ask for 10 gallons and we’d talk about whether they could make it on 3 or 5 gallons. Later on, it would be if they could make it with half or less than they asked for.”

Dogfish head produced and shipped 6,000 gallons of sanitizer | FILE PHOTO

With skyrocketing demand for hand sanitizer for first responders and in retail stores, sales volume for sanitizer hit $200 million from March to July this year, according to market research company The NPD Group. But when familiar brands like Purell were hard to find, distilleries were on the front lines to get it out to first responders and hospitals.

Delaware’s distilleries contribute $547 million in the state’s gross domestic product and support 8,609 jobs, according to the Distilled Spirits Council of the United States. Since the pandemic started, the industry overall has been battered with a April survey of 118 distilleries across the country reported sales dropped 64%.

Sanitizer helped “pay the bills in those months,” King said, but it wasn’t much better than being open in normal operating hours. When Delaware allowed up to 60% capacity and to-go alcohol sales until March 2021, EasySpeak Spirits turned away from sanitizer and back to its restaurant and bar business.

“We’re still selling whatever we have left on a first-come, first-serve basis. But we never intended to be in the sanitizer business,” he said. “[This summer] we’ve been doing well with outdoor seating. We probably won’t return to making sanitizer again unless the pandemic really ramps up again to help out.”

Part of the initial push in the First State was how quickly sanitizing products flew off the shelves in March. Products that disinfect 99.99% of germs, like Clorox and Purell, were hard to come by, and to spur getting it in the hands of health care workers, the U.S. Food and Drug Administration (FDA) relaxed the restrictions around production.

Painted Stave Distillery in Smyrna first made about 1,000 small bottles of hand sanitizer for the Smyrna Police Department after Delaware businesses were ordered to shut down. Then they were getting 150 calls per day.

“Our sales had dropped about 80% in March, and slowly ticked backup. But sanitizer was really keeping us alive April, May and June,” said Mike Rassumen, co-owner of Painted Stave. “This was our lifeline, since it was literally the only thing we were selling at one point.”

But that lifeline did not come without a price. Rassumen and his partner Ron Gomes are scientists at heart, so to keep with the World Health Organization’s recipe for sanitizer, it had to invest in hydrogen peroxide and glycerin to make it as well as the bottles to package it.

“We invested in $10,000 from day one in packaging and raw ingredients and we’re very fortunate to have a great relationship with the Dover Credit Union to get that done so quickly,” Rassumen said. “But by mid-June we were at a crossroads whether to invest another $10,000 into this or let it run out.”

With restaurants reopening and customers slowly returning, Painted Stave decided to stop production of sanitizer. By August, it had 6,500 bottles left to sell or donate.

“We knew this was not going to be a long-term business with the supply chain coming back,” Rassumen added.

By late summer, other cleaning and beauty product lines switched gears to hand wipes and sanitizers and stabilized the supply chain. Although Purell is still being directly routed to hospitals and other first responders, new name brands have stocked the shelves at drug stores.

Here in the First State, the biggest customers for made-in-Delaware sanitizer was most likely the state government itself. Rassumen said the state government requested “tens of thousands” of bottles at one time and their craft cocktail enterprise wasn’t equipped to do that – but Dogfish Head Brewery in Milton was. 

When Dogfish Head founder Sam Calagione and Carney first announced the exclusive partnership, Delaware’s largest craft brewery made 12 gallons for its staff. By the end of September, it had manufactured and shipped 6,000 gallons – enough to clean 1.5 million hands.

“We pivoted the majority of our distillery operations to the production of hand sanitizer; however, we did continue making our scratch-made spirits as well,” said Megan Bayles, Dogfish Head communication specialist. “To facilitate our increase in production of hand sanitizer, we were able to provide work to a variety of co-workers from across our coastal Delaware properties that would have otherwise been impacted by the government-mandated closures.”

Dogfish Head sold the sanitizer directly to the state, which then in turn distributed to state-run agencies, specifically first responders and nonprofits. Hospitals and other essential businesses and first responders not directly set up with the state, the brewery set up a turn-key operation for requests and orders. 

All proceeds from Dogfish Head’s sanitizer sales went to Delaware Restaurant Industry’s Restaurant E.A.T.s  (Emergency Action Trust), a fund that distributes $500 grants to those in the hospitality industry that were impacted by the pandemic. By October, weeks after the brewery stopped making sanitizer, it had donated $64,000. On top of that, Sam and Mariah Calagione’s family foundation donated an additional $100,000.

While Dogfish Head was producing scores of gallons for the state, other state agencies and local first responders relied heavily on their local distillery. Painted Stave filled orders for some at the Delaware Department of Transportation, the Department of Corrections as well as the Dover Air Force Base and the fire departments. King said many went out to home health care agencies, and Easy Speak donated about 25% of what sanitizer it made.

Still, as distilleries around the country end sanitizer production and look at the upcoming winter, the outlook is uncertain. In August, the Distilled Spirits Council of the United States reported that 41% of sales evaporated — worth more than $700 million — and 31% of its employees have been furloughed.

Calagione’s outlook was optimistic, noting that while the brewery and distillery industry had to shift virtually overnight, there will always be a need for people to come together over a drink. One day when the pandemic ends, he told the Delaware Business Times in August, taprooms will be ready for business.

“It’s impossible to know when life will return to something that feels normal, and at this point in time, no one can intelligently speculate what the industry will look like in the coming months,” Calagione said.  “But, there is one thing for certain: when this pandemic subsides, people will want to reconnect with family and friends, and we will be here to help make that happen.”

It’s also opened the door for curbside pick-up and delivery services as well as e-commerce options. The Dogfish Head owner said he doesn’t see those options leaving the market once COVID-19 disappears.

For smaller operations like Painted Stave, it was a different story. They closed down their taproom in the summer by choice, and started to lean on cocktails to go. Once the weather warmed up, the distillery started taking reservations on its patio.

“What reopening means for our customers is tricky, because it was our choice to close out of caution but we do have cocktails to go,” Rassumen said.  “One thing that’s still killing us in Delaware is that we can’t ship directly while our competitors can. I’d love to see us flourish in that, but right now we’re still beholden to distributors.”

By Katie Tabeling

ktabeling@delawarebusinesstimes.com