May 24, 2021

Sanitizer Overstock an Issue for Promo Suppliers

  • by Admin

Roughly a year ago, hand sanitizer was a hot commodity, with demand so rampant that producers and providers couldn't keep up. Now, it's hard to give the germ- and virus-battling gel away. Retailers, distilleries and suppliers in the promotional products industry are among the entities dealing with significant overstock of hand sanitizers. "The market has cooled in recent weeks and many suppliers have dated product that will become urgent for them to sell in the short future," says Brandon Mackay, CEO of West Jordan, UT-based Top 40 promo supplier Snugz/USA (asi/88060). The glut is a result of changing dynamics and health guidance - all tied to COVID-19. Earlier in the pandemic, health leaders stressed the importance of sanitizing hands to protect against viral spread, causing a mad rush on hand sanitizer in the promotional products industry and beyond. But more recently, scientists have said COVID is essentially transmitted through the air and that face masks, social distancing and being fully vaccinated are the best ways to keep from getting sick, with sanitizer and other disinfecting agents not really playing a major role in prevention. Couple that advice with the fact that the increasingly widespread vaccination rollout is helping to reduce COVID infection rates and there's now much less demand for hand sanitizer. Data from NielsenIQ backs that up: Sales of hand sanitizer were down 80% year over year to $9.2 million for the week ended May 8, while average unit prices - at $2.10 - were about 40% lower than 12 months earlier, according to the data analytics firm. "Supply has now gotten ahead of demand and we're in an oversupply, overstock environment," says Alan Vaught, CEO of Garden Grove, CA-based Top 40 supplier Evans Manufacturing (asi/52840). "Overseas and U.S. suppliers can now produce enough to exceed demand. With that, the price has tumbled." Evans is among the promo suppliers dealing with an overstock in some of its sanitizer offerings. Since sanitizer has a shelf life and is taking up space that could be used for other products, there's urgency among promo suppliers to move product. That could lead these companies to further discount pricing on sanitizer and, in cases, give it away. "We're offering very aggressive pricing, and as the expiration dates get within about nine months, we plan to make donations to shelters and other nonprofits," shares Vaught. Snugz/USA is in the fortunate position of manufacturing its own sanitizer on-demand in its Utah facility, meaning the company isn't dealing with an overstock issue, according to Mackay. Still, the CEO carefully watches the marketplace and, similar to Vaught, predicts that "prices will drop drastically on sanitizer as suppliers try to avoid expiration risks and convert their inventory back to dollars. We'll see the market flooded with drastically discounted goods." The Wall Street Journal reports the same phenomenon is happening at retail. In a representative example, the WSJ shares how Piggly Wiggly stores in Alabama and Georgia are offering 4-for-1 specials on sanitizer, after previous stock-moving discounts of 50% and 75% failed to draw down inventory sufficiently. The retailer plans to give sanitizer away at checkout stations if the 4-for-1 initiative falls short. With demand so high for sanitizer in the spring and summer of 2020, distilleries in the U.S. got into making the product to help. Some are now dealing with immovable inventory and facing losses. "In Oregon, Crater Lake Spirits is giving away leftover sanitizers after it produced roughly 60,000 gallons of disinfectants for hospitals and hotels last summer," the WSJ reported. "The distillery expects to lose about $200,000 after using excess capacity to make sanitizers." There are a couple bright sides to the sanitizer overstock, Mackay and Vaught say. "The cooling of the sanitizer market does have a silver lining as we're all looking forward to returning to pre-pandemic lives," says Mackay. Adds Vaught: "With the demand and price on sanitizer tumbling, distilleries have gone back to making vodka and tequila. After the last year we've all had, thank goodness for that."

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