Why Supply-Chain Snags Might Make Hand Sanitizer Even Harder to Find

From isopropyl alcohol to plastic bottles, ingredients are scarce

empty shelves
While hand sanitizer is scarce in stores, so too are the ingredients needed to make more of it. Getty Images

Key insights:

As any entrepreneur will tell you, the success of a new brand has a lot to do with timing. And Brian Bushell’s timing could hardly have been better.

For well over a year, Bushell had been planning to add a grapefruit-scented hand sanitizer to By Humankind, his boutique line of personal-care products that launched in 2019. As the founding CEO of hipster cupcake phenom Baked by Melissa, Bushell had plenty of business experience, but he didn’t really need it to realize that, with hand sanitizer sales surging by 313% in early March alone, this was a fortuitous time to be selling the stuff.

“[This] is a product we’ve been developing for quite a while—long before this whole COVID thing started,” Bushell said. “But we hit the gas on it, given the demand.”

Yet, as things turned out, it was a different aspect of Bushell’s business plan that’s likely to make an even bigger difference for his company. The brand mission of By Humankind, which debuted its sanitizer this week, is to help decrease the amount of plastic waste in the world. It means, among other things, that his hand sanitizer comes in aluminum canisters.

And these days, that’s a good thing because plastic bottles are getting especially hard to find. In fact, plastic bottles have joined a roster of essential materials needed to make hand sanitizer—including alcohol, gel polymers and even towelettes used for antibacterial wipes—that are increasingly hard to source, prohibitively expensive or both.

Right now, the consumer hand-sanitizer segment is contending, quietly, with a sticky situation: While ordinary Americans are scrambling to find sanitizers on store shelves, the makers of those sanitizers are in a scramble of their own—for the raw materials to make the germ-killing elixir in the first place.

“That’s what’s happening, and that’s the major issue we’re dealing with,” said Rakesh Tammabattula, CEO of QYK Brands, maker of Glowy and Dr. J’s Natural brands. “Most manufacturers are just worried about how to continue producing,” he added.

How cheap ingredients suddenly got pricey

Three months since health authorities confirmed the first case of COVID-19 in the U.S., consumers have inured themselves to the fact that hand sanitizer isn’t available online or at the local chain store and won’t be for the foreseeable future. What’s less obvious is that the same demand for sanitizer that’s producing those shortages at the retail level, coupled with the corresponding need from institutions like police departments and hospitals, has created a chokehold that reaches all the way back up the line to the start of the supply chain itself.

That snag is most apparent with alcohol, which is the active and predominating ingredient in most hand sanitizers. (The National Institutes of Health recommends an ethanol or isopropanol concentration of at least 60% for a product to be effective against the virus.) One of the factors that made hand sanitizer such a viable business in the first place is that alcohol is cheap. Or, at least, it was cheap. Prior to the coronavirus crisis, alcohol could be had for a nickel or less per pound. As of March 19, however, the price had soared to 85 cents, according to figures from the Independent Commodity Intelligence Service (ICIS).

That level of demand has put enormous pressure on midsize companies like QYK Brands which, as a U.S. company, also must adhere to Food and Drug Administration guidelines and use only United States Pharmacopeia-grade alcohol. (The distilleries that have jumped into the fray in recent weeks to make hand sanitizer are doing so because, on March 20, the FDA announced it would take no action against companies like breweries and distilleries whipping up their own batches of sanitizer.)

Tammabattula said that while he has his pick of suppliers for alcohol, he can do nothing about the long wait times and the prices that have jumped by 200%. “There are multiple suppliers, but apparently no one here is able to keep up with the demand,” he said. “The demand is for five years’ worth of supply, [but] the [actual] supply is just a month.”

As the ICIS says on its website, “There are no quick fixes for either the strong demand or the shortages of product.”

The alcohol in hand sanitizers must be mixed with some type of polymer to retard evaporation and help the product spread easily across people’s skin. Many brands use a substance called Carbomer and that, too, has become harder to find. A good deal of the global supply of Carbomer comes from Ohio chemical giant Lubrizol.

Fortunately, the Berkshire Hathaway-owned company has tripled production since January. But across the supply spectrum, orders from healthcare companies are filled first, which leaves consumer-facing brands further back in the line. Earlier this month, Lubrizol promised it “will continue to explore ways to meet customer needs during these extraordinary times.”

The bottleneck of … bottles

Strangely enough, one particular dearth of hand sanitizer components happens to be a commodity that’s not even in the product itself—it’s the plastic bottles that most sanitizers come in.

“Almost 99% of the plastic bottles and every major supplier in the U.S. does come from China,” Tammabattula said. “The timing is such that there were not enough shipments coming from China for two months, and then the surge in demand. Nobody really had the bottles on their shelves of their warehouses. So, no one was prepared for it.”

By Humankind's aluminum bottles: a well-timed alternative to plastic
By Humankind

The current trouble with the bottle supply is, paradoxically, COVID-19’s earlier rampage through China. The pandemic peaked there around the second week of February, and not until mid-March did Chinese manufacturers begin to switch the lights back on at their plants. On Friday, China’s vice minister for industry Xin Guobin announced that 95% of his country’s larger firms were up and running. But the multiple weeks of shutdown created a trough in production that’s now hitting U.S. buyers. While some companies have been able to tap into their own reserve supply of bottles, that’s only a temporary fix.

The bottle shortage is being felt most by brands that don’t normally make hand sanitizer and have added it to their offerings only since the coronavirus crisis began. Earlier this month, David Foote, owner of downtown-Manhattan soap boutique Marianella told local cable channel NY1 that “in one day, there were no bottles, no pumps, there were no caps. That’s because China hasn’t been producing.”

Factory shutdowns in China are actually only part of the problem. It’s become difficult to get goods out of the country, period. When passenger airlines began canceling regularly scheduled flights in late January, they also curtailed what the industry calls “belly cargo,” the unused luggage space on passenger jets that carriers often use for freight. Air-cargo services also began to cancel flights around the same time and this—together with governments contracting planes to fly in urgently needed medical equipment—further constricted the supply chain for commercial clients. And while the Chinese government has more recently acted to increase air-freight capacity, shipping rates have soared.

Complicating the already serious strain on the supply chain is that customers for raw materials now include all sorts of entities that, in normal times, private brands would never have to compete with. Take the state of New York, for example. “We are introducing New York State Clean hand sanitizer, made conveniently by the state of New York,” Gov. Andrew Cuomo announced at a news conference on March 9. The state is deploying prison labor to make the concoction, which the governor has called a “superior product to products now on the market.”

New York has been producing sanitizer at a rate of 100,000 gallons a week. Seventy-five percent of the mix is alcohol, and all of it comes in plastic bottles.

Strategies for keeping up

So how are brands coping? Some have elected not to rely on Far East suppliers at all. “We’re not dealing with international supply chain challenges in this product,” By Humankind’s Bushell said. As early as three months ago, he foresaw that “the supply chain [was] getting screwed up in China. We saw the writing on the wall and said, ‘We’re going to stick with the U.S.’” (Bushell also acknowledged that using aluminum bottles is costlier than using plastic ones, but since the brand’s ethos is reducing plastic waste, it’s a cost he’s willing to bear.)

In the hunt for ingredients, others like QYK Brands’ Tammabattula have been left to scour Asian markets. “We are continuing to get a supply of the ingredients from all possible sources,” he said. “We’re getting them from India and the Philippines.”

He has also been looking into manufacturing his sanitizer in other forms such as sprays and liquids, which would at least free him from having to shop for the standard plastic pump-top bottles that everyone seems to want.

Still other brands are relying on the contingency plans developed in the heat of demand surges from years past. “We have a deep supplier network of not just primary suppliers, but also secondary and tertiary suppliers,” said Tom Feegel, president of  EO Products (Essential Oils), makers of a range of hand sanitizer gels, wipes and sprays. “We have also explored co-manufacturing partnerships to help ramp up capacity even faster,” he added.

EO’s crisis response was forged in the fires of a past pandemic. “We were also around for H1N1 in 2009,” Feegel said, “and while the scale of COVID-19 is significantly larger, we’ve gone through periods of rapid demand increases in the past and are using what we call our ‘super spike protocol’ internally to make sure we are doing everything we can to anticipate what may come next.”

Meanwhile, over at Purell …

And what about the 800-pound gorilla of the hand-sanitizer market, Purell? How is it coping with the supply-chain constriction?

It’s hard to know, exactly. Purell parent company GoJo Industries has not been speaking with the press since the COVID-19 crisis hit. But the company seems to be relying on a significant stockpile of supplies and, in all probability, standing arrangements with suppliers that receive priority treatment because Purell supplies its product to hospitals and other healthcare institutions. (The company has acknowledged that prioritizing customers on the front lines has made its sanitizer scarce in retail stores.)

The closest that GoJo has come to addressing any supply-chain problems publicly is a statement issued March 13, in which company CEO Carey Jaros said that “after becoming aware of the developing situation in China last December, we immediately activated our demand surge preparedness team,” and that “as part of our demand preparedness planning, we typically hold excess inventory and maintain the ability to increase production several times greater than typical demand.”

So long as the demand for hand sanitizer stays at historic highs, pressures on the supply chain are bound to continue. But if any market force stands to relieve the bottleneck on essential ingredients, it’s that hand sanitizer is actually less of a hot commodity than it was a month ago.

“Given that many shelter-in-place mandates have been placed, the demand for hand sanitizer has likely slowed, as consumers are staying home and have easy access to soap and water,” said Olivia Guinaugh, home and personal care analyst for Mintel.

Meanwhile, By Humankind’s sanitizers are selling at a quick clip since their debut, and Bushell feels reasonably confident he’s stocked up sufficiently for the near term. “We have taken every proactive step that we can in the supply chain to make it stay available and keep manufacturing this,” he said, “and that includes stocking raw ingredients before they’re mixed into the formula.”

And the thing that gives him the most peace of mind? “We’re not competing for those plastic bottles,” he said. “We’ve designed our own—and it’s aluminum.”

@UpperEastRob robert.klara@adweek.com Robert Klara is a senior editor, brands at Adweek, where he specializes in covering the evolution and impact of brands.