How did these companies survive the pitfalls of the pandemic pivot?
By Chuck ChiangIndustry
Nick Ngo still vividly remembers the spring of 2020, and the sudden wave of new shops making the same acrylic barriers as his business.
“During that time, companies would pop up. I remember (it was) anybody with a saw who was able to cut it,” said Ngo, project manager at Sixstream Signs Ltd. in Surrey, B.C. “I don’t necessarily agree with it, but that was what they were doing.”
What Ngo saw was part of a larger trend, a cascade of companies suddenly jumping into the COVID-19 economy, switching production from other fields into making everything from protective barriers and hand sanitizers to cleaning wipes and personal protective equipment.
Fast-forward three years, and many companies that emerged to manufacture and procure PPE in the early days of the pandemic have gone bust. But others like Sixstream that had pre-existing product lines before pivoting to pandemic-related products related to social distancing and hygiene have since managed to switch back, as supply lines and demand factors recovered and stabilized.
Scott Thompson, founder and distiller at Mad Laboratory Distilling in Vancouver, made the switch from his usual production of whisky and other spirits to making alcohol-based hand sanitizer and wipes during the pandemic.
Mad Lab is now back to full-time production of alcoholic beverages, and Thompson said the key to weathering the COVID market was to identify the nature of the swing and plan for the long term accordingly.
“We decided to not make selling sanitizer a part of our business,” Thompson said. “It turned out that we were right, but we were hopeful it was going to be a short-term demand.”
Still, Thompson said he could understand why other distilleries or alcohol producers jumped fully into the fray in the spring of 2020. He said demand for hand sanitizer during the pandemic’s initial months was something he had never seen before – or wants to see again.
“They were like, ‘We need more, more, more, more,’ And I’m like, I can make this much, this is what I can do. And really having to prioritize who got it first.? I was a wreck.”
Mad Lab’s last batch of sanitization products left the Vancouver distillery by early 2022, although others kept producing until the province ended an emergency authorization of production in May of that year.
Distillers survived the hand-sanitizer switch, said Tyler Dyck, president of the Craft Distillers Guild of B.C. However, Dyck said the pivot wasn’t painless, especially for a number of owners who wanted to make hand sanitizer a permanent part of their business.
Dyck, who is also the CEO of Okanagan Spirits Craft Distilleries, said most distillers in B.C. started making hand sanitizer in March 2020 because they saw the shortage at hospitals and other public facilities.
Many distillers devoted up to 80 per cent of overall production to hand sanitizer after the government put out an emergency call for supplies, Dyck said. When regular supply chains resumed and the price of sanitizer plummeted in 2022, B.C. switched back to original suppliers and told distillers to stop production. They were left with “hundreds of thousands of litres” of sanitizer but no major demand for it, said Dyck.
“It was not a difficult transition back,” Dyck said of production lines. “The problem is that some people invested a lot into (sanitizer). Distillers felt let down.”
Dyck said that at most 10 per cent of guild members broke even on sanitizer, with the entire sector forced to deal with an estimated $750,000 of “unrealized capital” when alcohol that could have been used for spirits was instead made into sanitizer that sat in storage.
Some producers managed to reduce stock by selling directly to consumers. But the entire experience was so bitter that Dyck said very few distillers would make emergency supplies again if another pandemic happens.
Most of the businesses that popped up almost overnight to cut and install barriers are now defunct, Ngo said.
Those who remain are the ones that had a stable, non-barrier business before COVID-19, Ngo said.
Today, Sixstream is back to almost exclusively making signs out of acrylic, with the remaining barrier work involving maintenance or other followup work.
The switch back was also smoothed for companies that not only had a dedicated market before the pandemic, but also had established sources of material that could be used for both COVID and non-COVID purposes.
Many of the barrier shops created in 2020 closed well before COVID restrictions were lifted, Ngo said, because of their inability to secure acrylic through frayed supply chains.
Others had inexperienced installers who botched projects.
“We’ve always had this in stock, so even before three years ago, we’ve always had these products on our shelves,” Ngo said of the acrylic Sixstream uses. “Again, we use them to make signs predominantly, but because of the demand, we did reallocate some of our inventory to start making barriers and shields and these physical-distancing products.”
Burnaby outdoor gear maker Mustang Survival also pivoted to pandemic-related production in 2020, converting production lines to make medical gowns. Like Sixstream and Mad Lab, Mustang did not overproduce in anticipation of demand that never materialized.
The company never took on more production than its contracts specified, said Paul Heel, vice-president of quality at The Wing Group, Mustang’s parent company
“We joked at one point about having a medical products division going forward,” said Heel. “If the opportunity had been there with more products, if Health Canada would be interested in doing it, it could have been quite easy just doing that going forward, but that didn’t come to fruition.”
Mustang partnered with Arc’teryx and Boardroom Clothing for the gown-production project, making 9,000 a month between April and June 2020. That was followed by an order from Health Canada for 150,000 gowns, which Mustang produced from July 2020 to Feb 2021.
For Mustang, it meant retooling production. Training staff was harder than procuring materials since the company used similar waterproof membranes in its jackets.
That flexibility, and not overextending production, ultimately, played a big role in the company’s ability to revert to normalized production, Heel said.
He said the experience had bolstered Mustang’s brand and strengthened the company’s manufacturing capabilities.
“We learned some things, for sure,” Heel said. “We had demand for our regular products, as well. It got to such a point that there was a push of, ‘Let’s get this contract finished so we can get back to our regular products, our regular markets’. We’ve learned things about becoming a little bit more agile in some areas.”