Speaker 1: Hi, I'm Carol Masser. Let's get to one of the
Speaker 1: feature stories in Bloomberg Business Week magazine this week. First
Speaker 1: of all, it's about Lysol. In fact, Lisol works hance
Speaker 1: americans insatiable demand for the coronavirus neutralizing disinfectant. The level
Speaker 1: of panic buying this year has been on par with
Speaker 1: purchases of toilet paper and rice. Most of America's supply
Speaker 1: comes from a New Jersey factory where every day at
Speaker 1: least three tanker cars of ethanol arrived by train, each
Speaker 1: caring about thirty thousand gallons. The plant can produce seven
Speaker 1: eight hundred cans of lysol a minute, all of them
Speaker 1: quickly bought and used or hoarded by Americans desperate to
Speaker 1: keep their stuff fires free. Record. Ben Keiser Group PLC,
Speaker 1: Lysol's corporate parent, says that by year end it will
Speaker 1: be producing thirty five million cans of lysol in North
Speaker 1: America each month, more than triple its pre COVID nineteen peak,
Speaker 1: and enough to put a can in most American households
Speaker 1: before winter is over. So far, Lysol sales are up
Speaker 1: more than seventy this year, Ingrecket's market value to well
Speaker 1: over sixty billion dollars the company's gain market share, while
Speaker 1: rivals such as chlorics have stayed flat or struggled to
Speaker 1: keep up. And yet the increased production hasn't been enough
Speaker 1: to keep store shelves consistently stocked. This Bloomberg podcast is
Speaker 1: sponsored by Wells Fargo Commercial Banking. We're helping customers chart
Speaker 1: the way ahead in uncertain times. Lysol is working on it.
Speaker 1: The sanitizer maker is turning out more product than ever before,
Speaker 1: but with a pandemic winter on the way, that's still
Speaker 1: not enough. By Drew Armstrong, one of America's most recognizable
Speaker 1: icons of fresh scented cleanliness comes from New Jersey. No
Speaker 1: matter where US shoppers are lucky enough to spot cans
Speaker 1: of Lysol, the sanitizing spray was almost certainly produced at
Speaker 1: the same sprawling, tan colored factory in a suburb an
Speaker 1: hour's drive from New York City. Over the noisy plant's
Speaker 1: concrete floors, a steady stream of empty cans clink through
Speaker 1: an assembly line, waiting to be filled. On the line,
Speaker 1: a machine packs them all with a blend of ethanol,
Speaker 1: another disinfecting chemical called a quater narrow and ammonium compound
Speaker 1: or quat and some scent employees call the mixture the juice.
Speaker 1: A machine called a filtech scans each can to make
Speaker 1: sure it got exactly nineteen ounces. Then a device called
Speaker 1: a crimper adds the metal top that will spray the
Speaker 1: liceol through the attached plastic straw. In a separate room,
Speaker 1: Another machine uses the straw to inject the butane that
Speaker 1: propels the spray. Then the can gets a bath in
Speaker 1: a pool of one hundred forty degree water surrounded by
Speaker 1: a half inch of ballistic glass. This makes it almost
Speaker 1: impossible for the top to burst later unless somebody throws
Speaker 1: one into a bonfire. If it's going to explode, it'll
Speaker 1: blow here, says chazev Malik, the site director, not on
Speaker 1: the shelf of a wal Mart. Other machines push on
Speaker 1: the plastic nozzle wrap on the lysol label and add
Speaker 1: a cap up top. The cans are bundled into cases
Speaker 1: and palettes, which are placed onto distribution trucks by forklift.
Speaker 1: While new empty cans arrived from a supplier in Pennsylvania.
Speaker 1: The pace has been quicker throughout the pandemic because the
Speaker 1: plant has been running around the clock, excepting the downtime
Speaker 1: for shift changes every day. The factory uses up at
Speaker 1: least three tanker cars of ethanol that arrive by train,
Speaker 1: each carrying about thirty thousand gallons. The plant can produce
Speaker 1: seven eight hundred cans of lysol a minute, all of
Speaker 1: them quickly bought and used or hoarded by Americans desperate
Speaker 1: to keep their stuff virus free. For the record, Lysol
Speaker 1: works stars Cove two is an enveloped virus, a clump
Speaker 1: of genetic material wrapped in a membrane of fatty lipid molecules.
Speaker 1: Lysol's ethanol and quat act as solvents, ripping apart the
Speaker 1: lipid skin and leaving the viral material inert. That doesn't
Speaker 1: mean anyone should inject it a treatment. President Trump suggested
Speaker 1: doctors consider with disinfectants, including bleach earlier this year. Under
Speaker 1: no circumstance should our disinfectant products be administered into the
Speaker 1: human body. The updated Lysol website currently reads because that's
Speaker 1: where people are at these days. Over the course of
Speaker 1: this maddening year, lysol has been one of the few
Speaker 1: products that steadily experienced an unprecedented demand. It's approached frenzy,
Speaker 1: a level of panic buying on par with purchases of
Speaker 1: toilet paper and rice. In early March, when the New
Speaker 1: Jersey sales team tested the fervor by sending one retail
Speaker 1: store in Florida ten thousand cans, they sold out in
Speaker 1: less than two hours. Wreck At ben Keyser Group, Lysol's
Speaker 1: corporate parent, says that by year end, it will be
Speaker 1: producing thirty five million cans of lie Saul in North
Speaker 1: America each month, more than triple its pre COVID nineteen peak,
Speaker 1: and enough to put a can in most American households
Speaker 1: before winter is over. So far, Lysol sales are up
Speaker 1: more than seventy this year, pushing Reckett's market value to
Speaker 1: well over sixty billion dollars. The company has gained market
Speaker 1: share while rivals like Chlorox have stayed flat or struggled
Speaker 1: to keep up, and yet the increased production hasn't been
Speaker 1: enough to keep store shelves consistently stocked. Wreckett Benkeeser saw
Speaker 1: this coming both from its corporate headquarters outside London and
Speaker 1: at one of its biggest manufacturing hubs, located about a
Speaker 1: hundred and forty miles west of wu Han, China. But
Speaker 1: there was only so much the company could do to
Speaker 1: accommodate everyone. Lysol's parent has proven a leading indicator at
Speaker 1: several key points in the pandemic. With winter approaching, the
Speaker 1: latest is this. For all its successes in adapting its
Speaker 1: lean global supply chain to a hundred year plague, the
Speaker 1: company still hasn't quite managed to match supply to demand.
Speaker 1: We've been very transparent about what we have and what
Speaker 1: we don't have, says wreck At chief executive officer Laxman Narasiman.
Speaker 1: In some cases we do disappoint COVID terror would have
Speaker 1: sounded familiar to survivors of the cholera epidemics that swept
Speaker 1: much of the globe in the mid eighteen hundreds. Outbreaks
Speaker 1: killed hundreds of thousands of people who lacked access to
Speaker 1: clean water in the US and Europe. One killed three
Speaker 1: thousand New York residents in a matter of weeks and
Speaker 1: chased tens of thousands of people out of the city.
Speaker 1: By the end of the nineteenth century, germ theory had
Speaker 1: for the first time pointed to microscopic pathogens as the
Speaker 1: cause of infectious disease, and businesses were promising new forms
Speaker 1: of chemical protection. In eighteen eighty nine, a German chemist
Speaker 1: named Gustav Raupenstrauch created Lysol during the snake oil era.
Speaker 1: The early owner is marketed Lysol as everything from a
Speaker 1: household cleanser to more troublingly feminine hygiene product. Today's owners
Speaker 1: have restricted Lysol's used to surfaces, not people. Besides the cans,
Speaker 1: the company sells disinfecting wipes which rely on milder quats,
Speaker 1: cleaning sprays for kitchens, and a toilet bowl cleaner. The
Speaker 1: modern brand owes much of its luster to Joe Rubino,
Speaker 1: who started working on Lysol research and development in the
Speaker 1: nineteen eighties a couple of owners. Ago Rubino, known inside
Speaker 1: the company as Mr Lysol, is the R and D
Speaker 1: units go to communicator. He spent most of the past
Speaker 1: few decades running experiments to show just how gross everyday
Speaker 1: life can be and what a good chemical sprints that
Speaker 1: kills nine percent of germs can do about it. We're
Speaker 1: designed to share germs, he says in a garden state accent.
Speaker 1: Even if we're healthy, we're spreading our organisms to everybody.
Speaker 1: In a nineties study, Rubino's team coated a toy ball
Speaker 1: at a daycare center with a harmless virus that could
Speaker 1: serve as a sort of contact tracer. When the researchers
Speaker 1: used swabs to test for the virus. At the end
Speaker 1: of the day, all nine kids at the daycare had
Speaker 1: bits of it on their hands, and they spread it
Speaker 1: everywhere at home too, from high chairs to bathtubs to beds.
Speaker 1: In two thousand seven, the company put thirty people with
Speaker 1: the common cold in separate hotel rooms for a night,
Speaker 1: then found traces of the cold virus throughout the rooms.
Speaker 1: Some of the more photogenic lysol science has taken place
Speaker 1: at the brand's R and D Center in Montvale, New Jersey,
Speaker 1: located below the New York state line. The R and
Speaker 1: D team keeps a list of about one thousand customers
Speaker 1: it can invite into its mock kitchen or suite of
Speaker 1: glass enclosed bathrooms to provide opinions on product scents and
Speaker 1: spray bottle sounds. The ps de Resistance is Room A
Speaker 1: one fifty four, better known as Flushing Meadows. It's an
Speaker 1: ode to the commode, a throw own room lined with
Speaker 1: one four toilets from around the world, arranged inches apart
Speaker 1: in three aisles beneath national flags. Tanks and filters in
Speaker 1: an adjacent room replicate the water conditions in different countries,
Speaker 1: and above each bowl, mechanized plungers test the toilets at
Speaker 1: different flush rates, laying the foundation for success. A plaque
Speaker 1: on one wall reads during a Bloomberg Business Week visit
Speaker 1: to the R and D Center this fall, the flushing
Speaker 1: meadows toilets were helping to test experimental products code named
Speaker 1: for Donkey Kong, Tetris and other video games. To conduct
Speaker 1: smell tests, the staff can fit a plexiglass hood over
Speaker 1: a bowl, then open a top flap on the hood
Speaker 1: in turn and breathe deeply. A lot goes into making
Speaker 1: toilet bowl cleaners that you would never even think about.
Speaker 1: Ruby No said, in an understatement, we can make rust
Speaker 1: stains in here, we can make simulated fecal stains, and
Speaker 1: we'll see how well the products remove that. The foe
Speaker 1: PO comprises dirt, brown dye, and sometimes peanut butter. He said,
Speaker 1: there is a formula for it. This visit was Rubino's
Speaker 1: first time back at the R and D Center in months.
Speaker 1: Although he's semi retired in twenty nineteen, he's continued working
Speaker 1: from home three days a week through the pandemic. His
Speaker 1: version of the COVID nightmare began in late December with
Speaker 1: an email from a medical alert service called ProMED. The
Speaker 1: subject line was undiagnosed pneumonia China. A week and several
Speaker 1: escalating alerts later, Rubino sent a note to colleagues, here's
Speaker 1: something we need to watch up. The Yangtze River from
Speaker 1: Wuhan lies the city of Jingzho, home to one of
Speaker 1: Rickett's biggest manufacturing plants. Most of the products made there
Speaker 1: are part of Lysol's sister brand deat All. In late January,
Speaker 1: when lockdowns began in Hubei Province, which includes both cities,
Speaker 1: David Gao, site director of the Jinghoe plant, called his
Speaker 1: lieutenants and told them not to go home. The timing
Speaker 1: could hardly have been worse. It was the start of
Speaker 1: the week long Chinese New Year, when the whole country
Speaker 1: goes on vacation. About three hundred and fifty of the
Speaker 1: factories four hundred workers had already left the city, and
Speaker 1: not enough remained to restart disinfectant production. With the public
Speaker 1: health crisis spiraling, Gau canceled his employees vacations and negotiated
Speaker 1: travel permits with the government to allow them to return
Speaker 1: to work. I talked to the government and told them
Speaker 1: we are the factory to make the disinfectant. Gau says.
Speaker 1: The permits came through we chat and managers helped return
Speaker 1: close to three hundred people. One worker rode a bicycle
Speaker 1: six hours to get to the plant, Gao says, another
Speaker 1: walked thirteen hours. The government helped put the wrecket staff
Speaker 1: up in hotels for weeks, isolated even from their families,
Speaker 1: and a neighboring factory boss topped up the plant's dwindling
Speaker 1: supply of masks in exchange for disinfectant. Gau says. No
Speaker 1: one at the plant got COVID. The employee sacrificed a lot,
Speaker 1: he says, nobody quit. By the end of jan weary
Speaker 1: people in Europe were testing positive for the disease. The
Speaker 1: World Health Organization had declared the coronavirus and international public
Speaker 1: health emergency, and Narasiman, who had been wreck at CEO
Speaker 1: only a few months, ordered his executives to maximize production
Speaker 1: by any means necessary. Guys turn on the factories twenty
Speaker 1: four hours, he recalls, telling them during a conference call,
Speaker 1: we went full blast. One problem with going full blast
Speaker 1: was that every consumer hygiene company in the world was
Speaker 1: doing the same thing, and they all rely on a
Speaker 1: lot of the same key ingredients. With Lysol and its
Speaker 1: rivals gobbling up hundreds of thousands of gallons of ethanol
Speaker 1: and tons of quats, there wasn't enough to go around.
Speaker 1: Even when the pandemic jumbled supply chain was at its best,
Speaker 1: and like many global manufacturers, Wreckett keeps little spare material
Speaker 1: on hand. It relies on shipping companies to deliver steady supplies.
Speaker 1: It's a global supply chain and it's not integrated, says
Speaker 1: Frederick du Trene, senior vice president of supply for the
Speaker 1: company's health division. The jing Joe factory, for example, needed
Speaker 1: outside suppliers to deliver more than one different raw materials
Speaker 1: and parts. When he learned there wasn't enough of a
Speaker 1: critical chemical left in all of China to meet its
Speaker 1: increased production needs, du Trene decided to eat the cost
Speaker 1: of flying in more from the UK. For a supply
Speaker 1: chain executive, having to air freight tens of tons of
Speaker 1: raw materials across continents is something close to a worst nightmare.
Speaker 1: His bosses didn't want to raise prices and be seen
Speaker 1: as taking advantage of the pandemic. We decided not to
Speaker 1: do any compromise on this. Du Trenee says margin has
Speaker 1: not been a driver. As COVID spread through the US
Speaker 1: and lisol hoarding began in earnest, the assembly line started
Speaker 1: running short of quats and ethanol. Again, the supply team
Speaker 1: found answers in Europe flying in more quads. Eventually, the
Speaker 1: company located a plant in Nebraska with spare ethanol from
Speaker 1: its lower grade gasoline additive and retooled it to make
Speaker 1: purer ethanol for lysol. It also looked online to see
Speaker 1: who around the world was selling alternatives to lysol or
Speaker 1: chlorox products. The hundreds of small never heard of it
Speaker 1: brands that suddenly populated Amazon, dot Com and other websites
Speaker 1: this spring and began signing deals with the smaller companies
Speaker 1: to use their production capacity. Pre Covid. Lysol production capabilities
Speaker 1: in North America topped out at about ten million cans
Speaker 1: a month, according to Wreckett, With more than a dozen
Speaker 1: contractors signed up to produce more, the monthly number should
Speaker 1: hit the thirty five million mark by the end of
Speaker 1: the year. The company says, plus more than thirty million
Speaker 1: cans of wipes, up from less than seven million cans
Speaker 1: a year ago. While the company still hasn't been able
Speaker 1: to meet all of the demand, its gains in market
Speaker 1: share suggest that its outpacing competitors. Along with the seventy
Speaker 1: revenue increase for Lysol products, Debt Hall sales are up
Speaker 1: fifty around the world, and Wreckett has managed to keep
Speaker 1: other cleaning supplies in circulation too. Because people are staying
Speaker 1: home more, they're using more of the company's dish detergent.
Speaker 1: They're lonelier, so they're getting pets and buying more Resolve,
Speaker 1: its spray product for carpet messes. More cooking and pets
Speaker 1: mean more smells in the house. Therefore, people need more
Speaker 1: air fresheners. Sales of the company's directs condoms, however, have
Speaker 1: yet to rebound to pre pandemic levels. Recket expects something
Speaker 1: like the current level of demand to last through much
Speaker 1: of it says increased capacity from new contract manufacturers will
Speaker 1: allow it to sell as much Lisol as retailers want
Speaker 1: by the spring, and to resume making products in the
Speaker 1: sense and sizes it eliminated this year for the sake
Speaker 1: of efficiency. People will want to get their favorite fragrance back,
Speaker 1: says Harold Van den Breck, the president, of Reckett's hygiene business.
Speaker 1: They will want to get the wipes that they were
Speaker 1: used to. Narasiman says he's considering introducing a hand sanitizer
Speaker 1: in the US market where Purel don and aids. Wrecket
Speaker 1: is also investing in more US manufacturing facilities so it
Speaker 1: can reduce its reliance on contractors later this year, and
Speaker 1: it says be self sufficient by three The added capacity
Speaker 1: is a bet that the pandemic has permanently changed how
Speaker 1: people think about cleaning their houses and themselves. Even when
Speaker 1: all this goes away, demand for our products will be
Speaker 1: structurally higher than what they were pre COVID. Narasiman says.
Speaker 1: While that bet seems pretty safe right now, it remains
Speaker 1: tough for the company to gauge exactly where demand might settle.
Speaker 1: About three months ago, the Lysol team began sending ten
Speaker 1: times its usual shipments to a group of thirty to
Speaker 1: fifty U S retail stores, depending on the day or week.
Speaker 1: Some days, the company says, every last item sells within
Speaker 1: two hours. It's not a perfect test. The Lysol team
Speaker 1: has received reports that customers post online whenever they spot
Speaker 1: cans or wipes in the test locations, bringing in more
Speaker 1: shops for now and likely through the winter, many Americans
Speaker 1: in search of Lysol and other household disinfectants won't be
Speaker 1: able to buy as much as they want. During a
Speaker 1: typical shift at the New Jersey factory from seven thirty
Speaker 1: am to three thirty pm, a digital counter on a
Speaker 1: wall keeps track of how many finished cases the assembly
Speaker 1: line has produced on that day this fall, with about
Speaker 1: an hour left in the shift, the count stood at
Speaker 1: six thousand, four hundred and seventy five cases of lysol,
Speaker 1: or almost eighty thousand cans. In the packing area, the
Speaker 1: machines were still loud enough to require ear plugs. Cal Swedberg,
Speaker 1: Wrecketts regional manufacturing director, looked up as hundreds of finished
Speaker 1: canisters wound down rows of conveyor belts stacked twenty to
Speaker 1: thirty feet high. Employees call it the Wall of Lysol.
Speaker 1: As the cylinders rolled off the line to be wrapped
Speaker 1: into cases and then into two thousand canned palettes. Swedberg
Speaker 1: said that lasts a costco about three minutes, and that's
Speaker 1: one of the feature stories this week in the magazine.
Speaker 1: Check out more in the current issue of Bloomberg Business Week.
Speaker 1: It's on newsstands online end at Bloomberg dot com and
Speaker 1: of course, always on the Bloomberg terminal. I'm Carol Masser.
Speaker 1: November through December four, join Bloomberg for a week dedicated
Speaker 1: to the mainstreaming of sustainable finance. Five days of events
Speaker 1: and insight. We're accelerating towards seventy five trillion dollars in
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