June 5, 2020 | COVID-19 crisis
Back in April, when ABI’s annual CEO survey was sent out to hundreds of companies around the state, Iowa was effectively in a lockdown due to COVID-19. Nonessential businesses were closed, many employees worked from home — and the effect it had on the economy was drastic.
Many have stepped up to support their communities and team members, ensuring business chugs along while everyone figures out how to operate in these unprecedented times.
FILLING A NEED
On a typical day at the Mississippi River Distilling Co., a craft distillery in Le Claire, patrons can order all kinds of handcrafted spirits in the shop or bar area. But these days, alcoholic beverages aren’t the main product for sale — it’s hand sanitizer.
Back in mid-March when Gov. Kim Reynolds ordered all restaurants and bars to close dining rooms, Ryan Burchett, the owner of Mississippi River Distilling, knew he’d have to pivot. Most of his company’s revenue comes from customers in the retail shop and bar, while the rest comes via distributors. Quickly, most of the distillers in the space were converted to make hand sanitizer, helping combat the spread of the pandemic while bringing in a crucial stream of revenue.
“We’re small enough that it allows us to respond to things like this,” Burchett said. “We can pivot on a dime and start a new business arm. And this was a big deal for the community. Millions of people were using a product that hadn’t been used like that before. Traditional manufacturers were overwhelmed.”
Burchett said his company received all kinds of thank-you notes in the mail. Hand sanitizer also allowed many employees to keep working at a time when people are filing for unemployment at record levels.
“It’s a reminder that what we’re doing here is bigger than just filling bottles and getting them out the door,” Burchett said. “It’s filling a community need and making a difference in people’s lives. Sometimes, that’s kind of surreal.”
There are still plenty of questions about what the future holds for the company and the rest of the service industry. Typically, business models like these are rewarded when the place is nearly full. The coronavirus will likely prevent that in the near future. Burchett said he’s unsure how long it will take the business to recover. And he tries not to lose sleep over it since much of it is out of his control.
“The whole situation is so fluid that we have to be thinking about it, but we won’t know what it’s going to look like until it gets here,” he said. “So, we just have to take it a day at a time. Figure out what we have to get through today and then live to see tomorrow.”
Burchett said he’s been impressed with the response by both the state and federal governments. He’s curious to see what happens at the other side of this period of social distancing, as there will be a new normal.
“I expect the government will provide a framework for us to work within,” he said. “But I think this is a marathon and not a sprint.”
THE NEW NORMAL
Hy-Capacity Ag Parts, a tractor parts manufacturer in Humboldt, was proactive in its approach to COVID-19. Before schools were closed in midMarch, leadership met with team members to implement new prevention strategies and encourage them to stay home if they were sick. The company created new communication systems, put together a task force to tackle problems with the coronavirus and worked with Iowa State University’s Center for Industrial Research and Services on guidelines.
“We were just trying to keep our antennas up for things going on around us,” said Molly Varangkounh, president at Hy-Capacity. “And this kept hitting the news cycle, and we have some suppliers in China. So we were kind of peripherally aware of it. We just wanted to stay ahead.”
While the company adjusted how they operated, anxiety around the pandemic hasn’t taken a big hit on the business. Most of Hy-Capacity’s clientele are farmers, who are still planting and tending to their fields as normal. Hy-Capacity enjoyed a good March, and April was slightly off projections, but that could have been due to a number of other factors.
“Farmers need to be in the field regardless, so we’ve been trying to stay healthy and be there when they need us,” Varangkounh said.
In early May, Hy-Capacity also shifted some of its manufacturing to help make masks for local hospitals. The company has a sewing department that makes tractor seats, but had to source different materials to make the proper equipment.
Varangkounh is sure business operations will be altered for a long time. But that means more companies will be forced to adapt. For example, HyCapacity has seen their sales people working from home, making calls via Zoom. She calls the future more of “an evolution than a recovery.”
“We will likely see some of the things we never thought we could do actually work,” she said. “Maybe this will allow us to revisit how we sell and how we do business.”
COVID-19 started raising alarm bells for Steve Doerfler back in January. The president and CEO of Metalcraft, a Mason City manufacturer of tags and labels, noticed supply chain disruption as the coronavirus spread throughout China. And when it hit Milan and other parts of Italy, more interruptions followed.
“Once we saw shutdowns happening and being extended, COVID-19 became a weekly issue in our weekly leadership team meeting,” Doerfler said.
That was in February. When the pandemic began to spread quickly in the United States in March, the company was prepared. They drafted a business continuity plan and made adjustments to hours and operations to properly social-distance.
The company even stepped up to help the shortage in personal protective equipment. Some production lines shifted to creating face shields for medical workers, creating a new revenue stream and accomplishing one of the business missions of citizenship. By mid-May, Metalcraft had produced more than 50,000 face shields.
“Our team members really got behind that because they knew they were making an impact,” Doerfler said. “This is altruistic, and we were helping out the first responder and health care workers by making these.”
On a business level, Doerfler said revenues in April were down about 25% to 30%. For the most part, he’s unsure what the future holds.
“We’re bracing for the fact that this quarter, it’s going to be difficult to determine the percent we’re down, but we’re fine with that and are planning for that,” Doerfler said.
He commended the government response at both the state and federal levels. The CARES Act, which was passed by Congress and signed in March, helped provide a stopgap in revenue for Metalcraft. Doerfler believes it’s been valuable for Iowa to remain relatively open throughout the past two months, allowing businesses to adapt and implement proper guidelines to help mitigate the spread.
“I think staying open gave us this perception that we’re going to try and work and control this while being open, and we did,” he said.
A QUICK RESPONSE
Phil Harrington, president of Kuder in Adel, doesn’t mince words when it comes to his company’s planning. At the beginning of 2020, they didn’t have a disaster recovery plan. There was nothing in place if something like a pandemic cropped up. But in early March, when the coronavirus was spreading globally, Kuder kicked planning into high gear.
All 55 employees were sent to work from home by March 13, which was ahead of what many businesses in the state were doing at the time.
“It really showed how quick and how smart my team was,” Harrington said. “We just jumped into it and figured out what more we needed to do. We take an enormous amount of phone calls every day, and we live on the internet. So we had to equip our [information technology] team to help put the bones in place. That happened very quickly.”
Kuder, which provides career and education assessment and planning, does a lot of business with the state, which has seen its priorities shift toward mitigating the pandemic. Harrington said he won’t know the true business effects until up to a year from now, when the state’s drastically lower tax revenues likely lead to a smaller budget.
But on the other side, Harrington believes there’s an opportunity. Many people have lost their jobs and are looking for new career opportunities. Kuder’s software can provide that valuable service.
“On one hand, it’s scarier than hell of what could become in the future because of less tax revenue as it relates to college and career planning,” he said. “And yet on the other side, there’s probably a big opportunity for us here to serve those people who are really in need as we begin recovery.”
In some ways, Kuder has already helped fill a need. The company made some of its products and services free of charge to schools, students and parents around the globe through the end of June. Other products are offered at a reduced price.
Harrington gives a lot of credit to the state, which has handled this crisis “exceptionally.”
“I think the governor has done a marvelous job of managing through this time,” he said. “It was right on track of what our state needed.”
Harrington predicts it’ll take at least two years to fully recover as a business, and even that is a shot in the dark.
“I’m just going back to what it was like after 9/11,” Harrington said. “That was a couple of years, and this is probably going to be much more devastating than that was to the economy. I don’t know how many of us can’t think it’s going to be more than a few years, maybe several years.”
2020 CEO SURVEY | THE RESPONSE TO COVID-19
SURVEY TIME PERIOD: APRIL 21-28
YOUR ORGANIZATION’S RESPONSE
Did your organization have a crisis response plan in place prior to COVID-19?
Not Sure 1%
Did your organization provide assistance to the COVID-19 response—locally, statewide or nationally—such as producing PPE, making hand sanitizer or donating money or resources?
Not Sure 1%
In general, how long do you think it will take your organization to recover from the COVID-19 pandemic?
1-6 months 30%
7-12 months 20%
1+ year 32%
2+ years 8%
Not Sure 10%
THE STATE OF IOWA’S RESPONSE
Iowa was one of eight states that did not issue a shelter in place order. Do you agree with the governor’s decision to keep the state open?
Not Sure 7%
Which of the following statements do you agree with most?
The state government is doing enough to help businesses affected by COVID-19 75%
The state government is not doing enough to help businesses affected by COVID-19 24%
The state government is doing too much to help businesses affected by COVID-19 1%
THE FEDERAL GOVERNMENT’S RESPONSE
Which of the following statements do you agree with most?
The federal government is doing enough to help businesses affected by COVID-19 64%
The federal government is not doing enough to help businesses affected by COVID-19 29%
The federal government is doing too much to help businesses affected by COVID-19 7%