Hand Sanitizer, Startups and Still Waiting for $120,000 from Amazon
Update Jan 10th 2020: As of December 2020, all funds had been received from Amazon. Additionally, the total amount donated to charities was increased from $500k to $750k.
In March 2020 when COVID-19 struck, I was sitting at home in Cambridge thinking through how I would continue to make payroll and keep my teams busy at Sandymount Technologies and Point 5 Brewing. Inspired by a photograph in the Financial Times of a distillery in Europe that had converted to producing hand sanitizer, I thought about how I might quickly build a supply chain to sell hand sanitizer.
I had been shopping at Trader Joe’s and they had no hand sanitizer on the shelves. Any shops I called - Wholefoods, Target, CVS - were out of stock. If I could make it - I thought - I could sell it. It didn’t turn out to be that easy! I got onto social media and drew up a post on LinkedIn and Facebook asking friends if they would be interested in setting up a supply chain. Friends from MIT, Anton Hunt found a supply for alcohol, and Gina Brooks-Zak found a manufacturer that could convert to filling bottles. Together, our initial team drafted fliers touting the product and started to circulate them online and through connections. It was a chicken and egg problem. We would have the bottles and labels lined up, and then our alcohol supplier would suddenly sell the alcohol off to someone who could pay in cash. Conversely, at times we would have a large order lined up, but we would be scrambling to secure the alcohol.
Revenue started to come in with orders from homeless shelters, car washes, golf clubs and fire stations. At one point we cleared $100k in purchase orders and we started to take payment. The problem was, once we started to get in that money, we were on a clock to hit our promised delivery date, but we couldn’t start producing until we had $200k to buy all of the materials. Every day we couldn’t get to $200k in sales was another day of delay, another day where our supply chain of bottles and alcohol might fall apart because we didn’t have the cash to secure it in place. I didn’t want to spend any of the money we had received until we had the full $200k - it wouldn’t have been responsible to buy everything and then not be able to deliver.
It was a Friday towards the end of March. Anton, Gina and now Adam Weiner and Dana Hemmert from Sandymount, as well as my cousins John and Barry McGovern were doing everything to try and find a large buyer that would make the cashflow work. Chris Lazarte, who works with me at Sandymount helped me to set up an LLC for the operation because we didn’t have the time (never mind the expense) to set up a non-profit. Everything was ready to go, but large buyers kept on dropping out. Anton was offering all kinds of discounts to get a big buyer to jump but we couldn’t do it. I had to pull the plug. We refunded the money and e-mailed clients and suppliers apologizing. It was pretty bad - I had gained the trust of these buyers only to disappoint them. I didn’t want a situation where we were holding people’s money and not delivering the product.
The next day, Saturday morning, Anton Hunt gave me a call. One of his partners in a separate business had a huge demand for sanitizer but didn’t have a supply chain in place. Importantly, they had the funds to get the project rolling. A hastily pulled together deal over the weekend reignited the whole project. Anton and I were joking how this is the project that just wouldn’t die. For the next two months, our team held an online meeting every morning at 7.45 am. We would go over the logistics for the day, the orders of ethanol, tracking down bottles and bottle caps that were delayed, getting boxes, labels, hydrogen peroxide and glycerin ordered. It took us three weeks to get the production lines up to full speed - making over 40,000 bottles per day when we had two sites on-boarded. It was never plain sailing, there would always be some shortage of ethanol, some bottle caps that had been delivered without seals, or some federal alcohol permit that we had to start calling senators about to help us get it through – which they did!
Over the three-month period, the business was involved in producing over 1.2M bottles of hand sanitizer, selling primarily through Aero Healthcare in New York, partnering with SPEC Engineering in Chicago, Califormulations in Georgia, and then - towards the end - selling to Amazon for them to resell online. In June, it became pretty clear that the market was getting back to normal. We found it increasingly hard to find buyers of large quantities and it was time to wind the business down and direct efforts towards donations. The sign to move on was when Amazon decided not to place a further order beyond the 200,000 bottles they had purchased. We barely got in that order with Amazon before there was a surge of supply. I think we were the last supplier to be approved for 7-day payment terms, compared with the 90-day payment terms Amazon normally offers suppliers.
Over the next months, our team wound down operations, sold off any remaining bottles and alcohol, and started to direct donations to charities, with $500,000 donated as of the end of August, split between five charities: Fathers Uplift Inc.; Y2Y Network; Fresno Barrios Unidos; My Stuff Bags Foundation; and Urban Revival Inc., as well as 6,500 boxes donated to the Food Bank of Northern Indiana. The only thing we are waiting for now is for Amazon to pay out the remainder of their purchase order, which is for a bit over $120,000. It has been a real challenge working with the supplier portal on Amazon. Our last payment is now overdue by over two months and it isn’t clear how you resolve this kind of issue with a company like Amazon. We tried their dispute procedure, but it hasn’t worked to date. The company is very large, and it is hard to connect with a person who has the authority to fix the problem. Absent any other clear way to communicate with Amazon, I've pulled together a letter and sent it to Jeff@Amazon.com , sending hard copies to both him and also Jeffrey Wilke - who runs Global Consumer. $120,000 seems like a lot of money for us, but at least our team isn’t reliant on that money for income - it is destined for charity. I can imagine there are a lot of suppliers in a lot worse of a position than us.
I'm hopeful that the issue will be resolved because it’s a good outcome to have been able to provide hand sanitizer when it was needed, it’s a good outcome to have helped the charities, and I think it can be a good story for Amazon too. For the team involved, I think we’re lucky to have had this opportunity and that our skills and connections came together in a way that made the project work. It has been a huge highlight being able to work with Anton, Gina, Adam, Dana, Barry, Chris and John this year - and I hope I get to do many more projects with this level of excitement during the rest of my life.
Subscribe here to get my updates mailed to you once per month: