Jeff Pennington had a tough first half of March. The co-owner of Pennington Distilling Co. was tracking his numbers, which were already way down after his local distributor Best Brands was hit by the March 3 tornado and thus unable to ship any of his product for more than two weeks. Then the pandemic struck, and the honky-tonks of Lower Broad were shuttered by government edict — eliminating some important volume outlets for his flagship Pickers Vodka.
“We lost 40 percent of our business for a good 60 days there,” Pennington recalls.
Best known for Pickers, Pennington Distilling Co. had finally entered the national whiskey spotlight with recent medals at major spirits competitions. They’d won a Double Gold Medal and the award for Best Tennessee Whiskey with their Davidson Reserve Tennessee Straight Sour Mash Whiskey at the prestigious San Francisco World Spirits Competition. Pennington also earned medals for the latest editions of his rye and bourbon. “They say vodka pays the bills, but Davidson is my passion!” he says.
But just when PDC should have been making hay with their new award-winning brown liquors, Pennington found himself isolated from potential new customers. The spirits business is split into on-premise sales (bars and restaurants) and off-premise sales (retail outlets), and most big brands depend on retail sales for something like 70 to 80 percent of their revenue. PDC’s ratio skewed much more toward bar sales, particularly outside Tennessee — out of state, more than 60 percent of Pennington’s throughput comes across the bar at major outlets like the legendary Flora-Bama Lounge, where Pickers is the well vodka.
“Outside of the state, we really depend on the bartenders to sell our brands and educate the customers,” says Pennington. “Bartenders and servers are our best ambassadors, so it wasn’t the most ideal situation to have all those bars closed down.”
On the other side of the business, while liquor stores remained open (designated as essential businesses), consumers were gravitating away from craft spirits, preferring to grab a handle of something cheap near the front door to minimize their time in the store. Higher-end artisan products like Davidson Reserve require sampling and education to convert new customers, and those sales efforts weren’t possible during the early days of the COVID-19 pandemic. “San Francisco is the Olympics of spirits competitions, and we didn’t have the chance to promote it,” says Pennington. “We did buy some billboards, but then nobody was driving.”
Some distilleries comparable in size to PDC depend on sales through their own tasting rooms as an important part of their revenue mix, but Pennington had made the decision to limit his involvement in the whiskey-tourism game. With all three legs of the traditional liquor business model sawed off beneath him, Pennington was looking for a solution when an answer came knocking — a charity request for bulk hand sanitizer.
“We pivoted to hand sanitizer really by accident,” says Pennington with a chuckle. “We dipped our toe in, and within three days we were all in!”
The process of making commercial sanitizer isn’t as simple as making some alcohol and adding a little aloe to keep your hands from cracking. The official World Health Organization formula is very explicit, and federal regulations require additives to ensure that the product is not potable in order to exempt it from spirits taxes. An adjunct part of PDC’s business model has included blending and packaging for other smaller spirits brands, so they were uniquely positioned to undertake the process of converting base alcohol into sanitizer.
“One of my investors knows some people at the mayor’s office, and they reached out to see if we could help with some hand sanitizer,” says Pennington. “We figured we’d make 500 gallons for them for some goodwill that would cost us a few thousand dollars. So we did that, and then the Metro PD called, and some other small communities and nonprofits and the homeless shelter called, and we got up to about a thousand gallons. It was getting pretty expensive.
“And then we got a call from a distillery out of Oregon who had a government contract from the DOJ for a bunch of prisons asking if we could make some bulk stuff because they couldn’t do it all,” he continues. “I said, ‘We could do that — especially if they’re paying!’ Next thing you know we got a call from Amazon, who had been getting a bunch of bad press for Whole Foods and how they were protecting their employees. They were looking for a ton for internal use, and so we got that contract. I don’t mind charging Amazon. They don’t pay taxes!”
Within 10 days, Pennington went from making 500 gallons a day to 16,000 gallons daily. Instead of the belt-tightening and furloughs Pennington had been dreading, he found himself in expansion mode. “We updated a lot of our equipment overnight,” he says. “We were able to hire 15-plus displaced hospitality workers for six weeks to help us package. We paid $17.50 an hour and split up tips from the community donations we were getting at our Friday giveaways at the distillery. I think hospitality workers get knocked for being lazy, but we had a lot of people that wanted to work instead of taking unemployment. I joked with my guys at the shop who were amazed at how these guys were blowing them out of the water. ‘You see what good workers can do? You see how hard the hospitality industry is? I’d hire a bunch of Waffle House line cooks over you guys.’ ”
It quickly became apparent that PDC couldn’t keep up with orders without major changes in their processes. Pennington explains: “At first we started out using our own equipment, but as the Amazon and other contracts came in, we realized that there was no way we could make that much. So then we partnered up with Fresh Hospitality and Michael Bodnar, who had a relationship with a fuel ethanol plant that had equipment to make [U.S. Pharmacopeia-grade] ethanol. That’s the key ingredient in sanitizer that most people couldn’t get in bulk, so that’s what allowed us to go get some of these bigger contracts.”
But Pennington still wanted to give back to the community. “It allowed us to do a lot of giveaways,” he says. “The first Friday that we announced at 9:51 that we would be giving away sanitizer at the distillery, we had cars lined up by 10:01, and eventually it stretched all the way back to the interstate. We gave away sanitizer every Friday for six weeks. We finally saw the demand start to subside, but we added it up and realized that we ended up giving away — between the nonprofits, the homeless shelters, the police departments, emergency management, the Middle Tennessee towns that called and the giveaways to the community and local businesses — over $220,000 in free sanitizer. Which is pretty cool considering we didn’t lose money on this. We actually sold enough to be able to do that. We didn’t start off with that intention, it just kinda happened, and we’re grateful.”
“Sometimes it’s just dumb luck,” he says. “I’ve worked my butt off for eight years, literally humping 18-hour days, some days feeling like beating my head against the wall. [And then] out of nowhere, some business like this just falls in your lap. We didn’t even do anything to get this. We didn’t do anything different from any other distillery [every distillery is required to use the same recipe], but I think Fresh [Hospitality] was a great partnership who was able to get us access to pretty much unlimited ethanol. We’re still selling to big restaurant chains that are opening and the state of Tennessee for all their public buildings, and I do believe the pie is going to double or triple in that business overall.”
Even so, Pennington is glad to be back distilling his passion products in the Davidson Reserve portfolio. “The good thing is that the juice is good, and it’s there, in the barrels and in the bottles,” he says. “We’ll get the chance to get out there and prove how good it is when people feel comfortable to go out and feel normal.”
In the meantime, he’s thinking of staying in the sanitizer game for a while. “Like I told you about how vodka pays the bills, maybe sanitizer is another vodka."
