Episode 206: Jeremy Lott (SanMar) and Jonathan Isaacson (Gemline): A Look Ahead to 2022

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. Skucast is the official podcast of Common Skew.

Jonathan Isaacson is the chairman and CEO of the Gem Group, Inc., whom you know and love as Gemline. Jeremy Lott is the president and CEO of another one of our industry's love suppliers, SanMar. Today we are honored to have them both on the SkewCast to help us close out the year, but more importantly, help us look forward to 2022. Gemline has been recognized as one of the 12 largest companies in the industry. It has its primary operation in Lawrence, Massachusetts, where they are one of the largest employers, with a technical facility in Shenzhen, China. This year, ASI recognized Jonathan with one of our industry's highest honors, Person of the Year, not just for their record growth, which is astonishing enough, but for being a voice and influence for good. He was, and I'm quoting ASI here, at the heart of deeply impactful public health initiatives, from guiding local task forces to getting vaccines to people in the community. He also took a key role in promoting industry education aimed at combating COVID-19. Jeremy Lott is the president and CEO of SanMar. In addition to being the largest supplier in the industry with over $2.4 billion in revenue, Jeremy and SanMar were recognized by the Wall Street Journal as a 2021 Best Managed Company. The Best Managed Companies program is a high mark of excellence for private companies. U.S. designees must have revenues of at least $250 million, and they go through a rigorous qualification process. But Jeremy and Jonathan both lead organizations that Despite the challenges of the year, have achieved record growth, and more importantly, they both lead our industry in social responsibility and sustainability efforts. So today we talk about multiple topics, including what factors led to their growth, the permanent changes our industry can expect from these past few years of disruption, supply chain and where it stands now, plus what we can expect in 2022. We chat about how inflation can impact our industry, their CSR efforts, and finally, I do something I haven't really done before, and at the end of our chat, I ask each of them to interview the other and ask them anything.

I love these two guys.

I love how they lead their companies and how conscientious and intentional they are about both life and business. Like me, you'll enjoy this conversation. Hi friends, I'm Bobby LeHew, the Chief Content Officer at Common Skew. As I record this, we're only 3 weeks away from SkewCon, the conference for innovators, explorers, and dreamers in the promotional products industry. It's held in Las Vegas on January 9th, and by now you know that the in-person event is sold out, but SKUCON is also being broadcast virtually. So if you didn't get a ticket, we invite you to join us from the comfort of your home, your hotel room, wherever you are, to be inspired by folks like Davis Smith, the founder of Cotopaxi, design legend Aaron Draplin, Advocates' Ben Adams, Amber Creative's Jeremy Picker, Stephanie Leader from Leader Promos, Sandy Gonzalez from Made to Order, and many more. Virtual attendees will get exclusive interviews that the live attendees won't experience and even one-to-one networking. And if you register for the virtual experience, you'll receive the official SKUCON 2022 t-shirt, a shirt designed in collaboration with Aaron Draplin that you just have to see. I can't stress this enough. I encourage you to involve your whole company in SKUCon this year. I promise they will be energized and inspired to make 2022 their best year ever.

Hop on over to skucon.com to register your entire team today.

And now here's my conversation with our friends Jonathan and Jeremy.

In a year where some people saw success, others struggled, it has overall been a time of mixed results. But I'm talking to, you know, representatives of two companies who have seen significant growth despite a lot of the challenges. How much of that do you account for economic recovery? How much of that is inventory availability? How much as a result of strategic planning? Jonathan, let's start with you. What do you, what do you attribute this year's growth to?

When the pandemic came, there was clearly no visibility forward in terms of what was going to happen. One of the things that we did is set down some guiding principles for the company. First of all, safety above everything else, trying to come through it as a stronger company or at least intact because who knew what was going to happen during a pandemic and doing the most good for the most amount of people. Having those guiding principles allowed us to think about what we were going to invest in. We continued to invest in product development all the way through the pandemic. And we did very well through it, um, with PPE. Um, and because we were also an employer of choice in the area and able to hire, um, we had people, we had new product. And in March of 2021, we started to get concerned about third and fourth quarter of this year and what could potentially happen. So we bought really heavily So we had inventory, we had people, and we had new product, and it just all came together and it worked. We were fortunate in some ways on how things turned our way, but we had some good planning. So, you know, it was probably a mixture, but we had some good planning as well.

Ezra Klein in an episode recently had an episode on superforecasters, and this line I thought was apropos for you two, and that was that every consequential thing we do is an implicit forecast because we're making assumptions about what will follow. Jeremy, what about you? What do you attribute SanMar's growth to this year? And I know it's been an incredible year on one hand, struggling with inventory availability, but also an amazing year.

Yeah, you know, I am not a super forecaster. I've been wrong about just about everything that we thought was going to happen over the last 2 years. So I'm whatever the opposite of a super forecaster. I, first off, I think the, the industry has done well. I mean, I think that promotional products in general, I think the value that they bring to people's lives, to companies, to their ability to reward, thank, inspire, you know, promote, I think that has been shown to be more valuable in the last year. So I think Being in an industry that is increasing in value and the way that consumers and businesses think about it is a huge piece of it. I think then within the promotional world, I think we've been fortunate that apparel, I think, has taken a bigger share of the market than some other categories this year. And in apparel specifically, some of our better product and more retail brands, some of the things that have been higher perceived value, people have gravitated towards. And I think we've done a good doing a good job servicing those. So I think we've certainly benefited by those bigger trends. And then I think it is the, you know, frankly, the last two decades of building the global supply chain that we have, that's allowed us even as our inventory was depleted to continue to get in and high velocity product. So as challenging as everything has been, it's not that we haven't been able to bring in product, we have brought in a tremendous amount of product. In fact, we brought in more product this than ever before. It's just going out the door as fast as it's coming in, and we have an inventory deficit because of the months where we weren't buying, you know, in spring of '20 and into the fall of '20. So that certainly has challenged us, but our ability to have a velocity of product and to bring it in, I think, based on our supply chain we've built, has really put us in a good place to service the market. As not to where SanMar would like to service, but maybe better than some of our competitors this year. Right.

These past few years have really brought about so many changes in how we work, how we sell, how we work with our supply chain. In looking toward 2022 and beyond, what changes have had the most impact, do you think, that will remain permanent sort of moving forward? Jonathan?

A nice easy question. Um, one of the things is that I think a lot of the changes that we saw, people assume that they're a result of the pandemic, and I think that the pandemic has been a catalyzer. It's catalyzed faster change rather than being a reason for the change. Some things are pandemic-driven, um, but some things would have probably happened anyway. It just moved a heck of a lot faster because everybody had to move faster. I think one of the big changes is that the way that we use promotional items has likely been changed permanently. It seems that HR is a much bigger user of promotional products than before, maybe the dominant user right now versus marketing or sales. You know, it's hard to get good data on this, so I don't know that, but there certainly seems to be a lot more— it seems to be a lot more HR-driven. And I think that will, will stay for part of the reasons Jeremy articulated, the power of promotional items to reward, promote, and inspire people. I think events will likely change. The longer I think big companies going back to big meetings, I just will see what happens. If we have another year with those hold off, then potentially the CFO jumps in. But there'll be different kinds of meetings. And so the use of promotional products can hold. There'll be just different promotional products. And we're seeing a lot more complexity in orders. So people want things kitted together and sent to certain places. So the desire and ability to fulfill and ship directly to an individual with a lot of flexibility in terms of what they get is, I think, going to increase. That, that I think is here to stay. Or likely here to stay, I should be not so sure about anything given that there've been so many things I've been sure about that have turned out to be not true over the last couple of years. But I think there's going to be more complexity in orders going forward.

Yeah.

One thing that is astounding to me is that you look at the respect for our medium has been at a high that I've never witnessed before. And both of you sell premium products when you compare that against an inexpensive giveaway. You're both selling a premium product line or at least higher unit costs item. And it, to me, it's astounding kind of what's happening in the market. I think we'll look back at this moment in time as a pretty watershed moment for our industry in a very compelling way moving forward. Jeremy, what about you? What changes do you think have had that we've experienced that will be permanent moving forward?

I certainly agree with Jonathan that the pandemic accelerated trends that were already there and, and hyper-accelerated even some of them. And I think one of them that we're seeing at SanMar in a really significant way is is working from home and kind of that level. So, you know, we're based in Seattle, heavy tech companies kind of here that we compete against for labor, but we remodeled our office buildings during COVID We said, okay, we're closed. This is our chance to like relay out cubes and to put down some new carpet and some of those things, a light remodel. We took it and we're ripping out just about everything we did because of the 500 people that were in this building, you know, 2 years ago. Today, I have about 70 that are here. And I think even longer term, you know, we have 100, 120 that are here kind of on a regular basis. Now, it's— you have some of us who will be here full time, but you have a lot of people that are going to come in 1 day a week, 2 days a week, people who are just going to— who are never going to come in, people are going to come in for meetings or collaborations or celebrations. And so how we think about the office, how we work, together and that technology, I think is, you know, I think that's forever changed. And that's at SanMar, but that's also at distributors. So if distributors' salespeople are at home, you know, working remotely, what does that mean for, you know, our sales reps who, you know, pull a rack of the new product into an office and show, you know, the new 100 styles? Well, is that relevant, you know, going forward? How we go to market, how we sell, how we educate our customers on product, I just think all of that's changing in the world where we work remote. And so I think that's a big trend that we just don't know yet how it all plays out, but I don't see us all going back to the way we used to work.

Yeah.

Speaking of that, distributors and suppliers, this is such an intertwined ecosystem. I know John Mackey with Whole Foods always talked about the ecosystem of their model. And our ecosystem is so tight, so interesting the way distributors and suppliers suppliers work together. And on that point, we're talking about salespeople going out and selling to distributors. How can— this is such another big broad question, Jonathan— how can distributors be better partners for suppliers in 2022 to ensure we grow together?

There's no easy answer to that. Um, I think it's because it depends on so many different things. You know, people talk about, um, sending good orders or a whole bunch of other things. I'm going to go to something I think a little bit more simple right now and recognize that COVID has taken a toll on a lot of people in a lot of different ways. Even for people who say I've done fine during COVID you can't help but be affected as you watch family members and friends struggle through it. It's been a hard time for a lot of people. I think one of the things that we've seen is that problems quickly go thermonuclear when anything goes off the rails a little bit. And I think getting a shared sense of understanding that we're all in this together— and I don't know how you do this, this sort of kumbaya moment of saying, look, distributors are struggling because they're stuck in between all these supply chain issues that they didn't create. And you have one of those days where 4 suppliers who have been really reliable let you down for reasons that you can't fathom. And suppliers feel like punching bags or whatever it is. And if we call up the shipping company and scream at them, it means we'll get our containers absolutely last. And so you cannot scream. And the shipping companies are being— nobody wanted this. So I think the short version is to have a little bit of understanding that this has been a hard time for everybody and that maybe a little bit of patience and understanding of each other and the challenges that we all face. And I know it's probably not what people want to hear, but right now it's probably what's most in demand.

Yeah. Yeah. And I would— CJ at SKU Camp had touched on this a little bit, Jeremy. You might remember him talking about just, you know, the, the heat his team was— frontline team was taking. Someone, a mom who's answering the phones and worried about having to take her kid out of school for— because of COVID and all these things, is the one handling those calls. So a lot of compassion and grace. Is required. Jeremy, how about you?

I certainly echo what Jonathan said, but I would, I would add that I think the best way is just having really good communication. So when, when, you know, distributors are talking to us, it's not so much an anger over we don't have the purple polo that somebody needs. It's, it's how do we work together because we know the purple polo is delayed because of, you know, container issues or other issues. And so what do we do about that? When is it coming in? Can I place a backorder? What are alternative products? You know, how do we work together? Because we really— one of the things I've always enjoyed about the industry is that I never feel like I'm on the opposite side of the negotiating table from my customer. It's truly like we are in this together. At Sammer, we've always looked at the distributors, our salespeople, In fact, we don't call our salespeople salespeople. We call them territory managers. They don't sell anything. Our customers are the ones who are out selling all day long. And that's a hard job. And we get that. And we get that, how challenging it is when their supplier doesn't have product, doesn't deliver for them, or prices go up, or all the challenges. So if we're on the same side of that table, how do we work together to be successful? And I think people would take that approach. And I just think communication is the, is the key kind of to that. And so the more, more visibility that we have into the challenges that you're having, the opportunities you're having, the more you can work with your territory manager, the better we are servicing you.

Yeah, I would be completely remiss if I didn't at least talk about supply chain in one part of this conversation, because that's obviously on the top of everybody's mind. And what's ironic is that you live and breathe supply chain, but now it's at the front of everyone's consciousness. Jeremy, you talked about this at SKU Camp on the panel that we had, but What I'm curious about now is what is on your desk? Like, what initiatives are on your desk now in regards to supply chain, whether that's a shift in your inventory purchasing? Is there anything different on your desk right now that is relevant to the current supply chain problems, Jonathan?

You know, my guess is that we're both the same in that there's 1,000 things that one works on at a time like this, each one with a different time horizon that that you're working with. So there's untangling the Gordian knot of the immediate along with planning for the future. I'd like to focus mine on planning for the future. And, and in terms of two of the big things that we have on our table right now, or on our plate, one is a whole sourcing initiative, and it's, it's related to the second initiative, which is our eco focus. Sourcing has gotten a lot more complicated than hard goods for a whole bunch of reasons. One is what we're trying to do on the eco side, which adds an incredible layer of complexity as you start to dive into it. And where we also believe, as you talk about catalysts, that in a world like this where weather events seem to get more powerful, more destructive, that there's a generation of people who are going to look to their companies to make sure that they're approaching their supply chain in a responsible way, which includes some sort of focus on, on the most eco-friendly product that you can have. Some of the stuff that you do around this, as Jeremy well knows, because I've seen this at SanMar as well, some of their initiatives that they've done. These are really big lifts to get them done. They're hard, they're complicated, they're long-term, and they're a little bit— they're a bet on the future. But we are betting that the generations that are moving into or have moved and will continue to move into the buying positions, this will be increasingly demanded by them. And it's also just the right thing to do. So that's a big piece of what we're doing.

Yeah.

I want to ask about something specific later on in our conversation about this. Jeremy, how about you? What's on your desk right now that would give us a glimpse into supply chain challenges, changes, or initiatives that you're doing?

Here's what I would share about the supply chain. I think there was a time a few months ago I would've said the supply chain is just kind of a disaster and broken. I don't feel quite that way today. I think the supply chain, we still are playing this game of whack-a-mole. I have, I have, you know, containers at the port, but the port doesn't have enough operators to unload them. So I have drivers that wait and then they can't pick up containers, or I have containers that come to our cross dock, but I don't have enough empties waiting there so that I can move. Those are small challenges, but, but, you know, impactful at scale. But what they really mean is that the lead times of product is extended significantly. Once we all get to the point where it's understanding it's not a 90-day lead time, it's 150-day lead time now, well, now you can plan your business kind of to that, and we can manage around some of those supply chain challenges. You know, we had yarn, significant yarn constraints most of last year. Well, we have enough yarn today, but now we have to build more sewing capacity. You know, once I build sewing capacity, that'll move to something else, you know, that kind of will be the constraint. But at the end of the day, all of those things are manageable. For us, the biggest challenge though is how do we bring in so much significantly more every week than what we sell to rebuild the inventory, and we're starting just now to really see that, but that's going to take months of bringing in that much more product every week than we sell for us to kind of get to the place where we want to be. I would share that we continue to see price pressure, and that continues to be something that I worry about into next year. I think you saw the Fed signal today they're going to raise interest rates 3 times next year, and I think they're finally understanding or taking seriously some of the inflation piece. And I'm not an economist, but we certainly are feeling that level of inflation and price pressure on our product. So that's something that we're certainly working on. So there's lots of little things that are challenged today. At the end of the day, we are bringing in a significant amount of product. It's just how do we continue to get that flow continue to work.

Yeah.

Are you seeing— you mentioned at SKU Camp that you— no one here wants to predict, especially on supply chain, but you'd mentioned that we could see gradual improvements in supply chain. Throughout 2022, just progressive improvements.

I believe that to be the case. I mean, I believe over time that you will start to see, you know, capacities build and capacities kind of even out kind of in the system.

It's not—

we're not going to return to normal this year, but I think that you will see things continue to get better through this year. So that is my hope. And we will get to a point where where now you're unbalanced the other way. I mean, like, SanMar will have a place where we will have too much inventory, there will be too much supply and not enough demand, right? It will absolutely happen. Frankly, it's, you know, it's a problem I'm looking forward to, but, but there will be a time where this will shift on us the other way too. We know that. I mean, I'll tell you, I share with you one of my quick challenges. Today, I'm building that product not just for demand, but to fill the inventory hole that exists. So we have vendors that have gone and built significant capacity for us to manage that. At some point into late next year, we get to the point where we've now filled the hole and we just need to order to fill demand. Well, what happens to that capacity, those sewing lines that exist and all of those things? So that's something that we think about because we're very careful with our vendors and we don't want to just, yeah, go build 6 sewing lines because in July of next year I'm going to give you— now I'm going to want you to fire all those people, right? That's not the way we work with our vendors. And so, you know, that's a, that's a, a delicate balance that we have to have over time.

Jonathan, how do you feel about improvements in the supply chain? Do you see gradual improvements through next year? And I realize it's a very overgeneralized question.

By and large, yes, but I think different companies will have different experiences, that the market has now gotten a lot more complex. What Jeremy said about having too much inventory. I think there's going to be the whiplash effect. There's a lot of merchandise at port and/or moving, and we'll see what happens at the end of this, not only in this industry, but in a lot of other industries. And there's going to be a little bit of a rethinking of supply chains by a lot of people, both in terms of issues like this and Also, there's geopolitical issues which impact our supply chain as well. And that's going to be a calculus for a lot of people in terms of how they build out or rebuild out their supply chains post— I don't know if there is a post-COVID, post whatever this is.

Yeah. Right. Jeremy, you touched on inflation, and I want to start with Jonathan on this because, Jonathan, I know you've also had economists come on to your program and talk about this. But with inflation running fairly hot right now, are you concerned? And maybe that's, that's a dumb question. Maybe the question really is, how does inflation impact our industry and your business in particular?

Yeah, it's the— I would say it's the million-dollar question, but it's more than a million dollars. It's probably the billion-dollar question with all of this, because what we're really talking about at some level is the price elasticity. Everybody has been impacted by inflation that's coming in a number of fronts. And whether it's around the cost of the inputs, whether it's around labor, whether it's around transportation, you name it, a lot of even food has gone up and it's gone up not only here, it's gone up internationally.. And so the question is really what happens over time and how much the customers are willing to pay. And I don't— I think that what we know right now is that our end customers are still seeing value in the product. So we have raised prices and we've seen demand continue to accelerate. Part of that has been that there's been a move to better items in the market. Jeremy referenced that earlier in this. We're seeing exactly the same thing in terms of price points going up, moving to better product. There's a move to quality. I feel unsure about what's going to happen from here and whether this inflation is going to continue to— I suspect it won't continue to build in this way. But I said that about Boston real estate 10 years ago. I'm glad I didn't take my own advice and I actually own Boston real estate because it's been a great investment. But it seems like there's no end to it. And so it's a concern for all of us. And I don't think there's a supplier in the market today who looks forward to raising prices. I mean, one would think it, but we all do it with a fair amount of concern. Yeah. And with a fair amount of care.

I have a really dumb question, but that's my job is to ask the dumb questions here. You know, a lot of our program business is typically affected by price increases. But for the most part, what we sell, we turn around and mark up and sell to our clients. So here's my dumb question. Are we somewhat inoculated against inflationary concerns as an industry? Or is that naive?

I think it's naive. I mean, I think at a point— so I'm actually think, at least in the apparel side of the industry, that there has not been enough moderate inflation historically. For the last 20 years, you've seen apparel prices either be stagnant or go down, and I don't think that's positive for an industry. I think if you saw a very moderate level of inflation kind of annually, I think we should be charging more for a polo shirt today than we were 20 years ago, because the cost of running our businesses for all of us has gone up. And if I'm charging $10 for the shirt and you were charging $20, you should be charging $25 now if you were charging $20, you know, 10 years ago. I think the problem becomes when you have the level of inflation that we have today. And then the question is around what Jonathan mentioned around price elasticity. When do end users say it's too much? I can't buy new uniforms because It's too expensive now. You're just going to use the old uniform, or I was buying new uniforms every quarter for my staff. I'm going to buy them every 6 months now. That's a problem for the industry. And so I think it is a challenge at a level of inflation. We've seen the same thing with John that we've not seen today, the price increases that have happened dampen demand, but I think there is a point and we'll see if we hit that, where that happens. I am a little bit cautiously optimistic that you might see things start to moderate, but we'll see. It's going to be really interesting. And it's a real challenge for us, both from a wage perspective, the cost of our goods, and just operating our business across the board is more expensive today than it's ever been before. In a significant way. And that leads to higher prices.

Yeah. Jonathan, before I move on, is there anything else you want to comment on that topic?

No, I think, I think that's what Jeremy said is, is I think he has some good insights about what's happened to some of the categories in the industry. And that's why I said you're dealing with different companies in different sectors selling different products, both on distributor and the supplier side. And each one is going to have its own story. What we have seen, I think, is that the— we don't participate in this segment of the market, but the very opening price point I think is going to be especially challenged during this time for a whole bunch of reasons. But I think inflation is a concern and moderate inflation over a period of time not this, is a much better scenario than what we're seeing right now.

Yeah. For suppliers, particularly employment volatility is such a crucial concern right now. And according to the Wall Street Journal, since May, there have been more job openings than unemployed workers. Quits reached a high in September. Jeremy, how does the current job market impact SanMar?

Well, you know, I think in a lot of ways, I mean, we, we struggled with hiring throughout the year, especially in our distribution centers. And frankly, early in the year and into the summer, we were just too low of a wage and we were a little bit too slow to adjust. Once we adjusted, and we adjusted significantly, we were able to do a much better job of kind of bringing people in. But again, that level of kind of wage inflation was, was really significant. I mean, you were It could be upwards of $3 an hour more at the end of the year than you were making at the beginning of the year. So it was very significant across our distribution network. In our offices today, again, we've become more flexible. We are allowing people to work anywhere, but we're competing for talent with some of the biggest companies in the world who have unlimited resources. So when I'm competing against Amazon and Microsoft, and, you know, you know, whoever else is kind of here in the market for, for talent, it is, you know, it's, it's quite difficult. So we have to have a, a reason for them to want to come to Sandmarc. Because it's not, it's a difficult competitive market. So we try to differentiate around culture, we differentiate around You know, the kind of the environment, the stability of the business, our compliance and our mission around what we do around the world. You know, we try to do a lot of things too, and obviously we have to have a competitive wage, but even with all that, it's been a challenging kind of time. But those culture issues for us, we have to lead kind of with those and find the people who really think SanMar is a good fit for them and where they want to make their home. We had a campaign this year that said, like, you know, like, you get to choose your work family, choose wisely, you know, and it was all around kind of like, you know, us as an organization that people wanted to be a part of. And that really speaks to the culture that we have.

But certainly challenging time.

Yeah, Jonathan, you, you had an interesting— you kind of got ahead of this a little bit in that you have an interesting story of working with with the city and employment, if I remember right.

Can you share that? Well, we've done— I'm not sure which part you're talking about. We've been very engaged in the city in a lot of different ways. So we have a brand name within the city that's different than our brand name that's in the industry. And it's a brand name about being an employer of choice. So nobody had an easy hiring. I think we had it easier than most, and we were generally ahead of our hiring plan. All the way through the year. We had— Jeremy talked about moving bottlenecks. Our bottleneck was on proof approvals, because you have to train somebody to look at a piece of artwork and an item and say, yeah, this is going to look good. And you can't just flip a switch and have somebody expert in that. It takes time. But we were able to get people in. Wages definitely went up. We have Amazon moving in in a close to 4 million square foot facility. Not close, but not that far away. And we had been planning for that anyway, because companies like Amazon, Chewy, and Walmart, that's the new— the government's not setting the minimum wage, they are in reality. Also in terms of benefits. So if you think it's the government, just look how close you are to any major company like that, because they need people as well. Although that's going to be, in my understanding, a very highly automated facility. And so, um, there's a fair number of similarities between how SanMar approaches, um, hiring and how we do in terms of talking about stability and culture. Um, you know, the, the Lott family is there in that business. Um, the managers at Gemline are all there in that business. I was, you know, generally I'm in my office and I'm on the plant floor talking to people. And it, it is that a different kind of person who is attracted to that kind of touch. And so, um, the people that we hired were by and large referrals from people internally. That was our best mechanism for hiring. Yeah, people. And that's partly years of being engaged with our people in the community. And I think we have a lot of work to do still But I'll always think we have a lot of work to do still.

Yeah, you both have.

Um, can I tell you a quick— can I share a quick anecdote? Jonathan just said— so we had a, we had a referral bonus. If you referred somebody and they stayed for a certain number of days, you got like $1,000. And we had one of our employees, he was in our New Jersey distribution center, and his daughter apparently is proficient on social media. And so she went out and really liked promoted, you know, this kind of referral for Sandmarc. This one gentleman, we wrote a check for $30,000 for referring people who stayed. He made it in a very short period of time. So, you know, it was like referrals were key to getting people in, but it was a great story. Then we went and told that story to employees all across the country because we're like, look, this guy just made $30,000. You can do that too. People. So it was a great story to tell.

What a great program.

I love that. Speaking of people, you're both so passionate about this, and I really wanted to talk about this. Like, Jim, in 2020, Jim Lyon made more than $500,000, over, over half a million in monetary and in-kind donations to a variety of charitable causes through your brand partners, including Mere, Corksicle Soapbox, and WP. You collectively gave back more than $100,000 to multiple charitable organizations as a result of their products being sold by Jim Line. So you're both so deeply involved in giveback initiatives, and I want to ask you how this has impacted your organizations. And I'm really curious how this has impacted you personally. I mean, 20 years ago, we weren't talking about giveback programs, or at least maybe we were doing some of it, but we weren't talking about it much. Um, Jonathan, let's start with you.

It's interesting that you say that we weren't talking about it much. Because I took some slings and arrows internally for not talking about it very much. So what happened is over the last couple of years, as we've been quite prominent, you know, we had these, these awards that we got and people heard about some of the things that we were doing. And some of the people internally said, what, why didn't you tell us about this stuff? And people were a little bit grumpy about it, but I regret how I approached it in retrospect. We had this view, still have this view that companies have to get involved in the community. Because if they don't, then A, these are the communities that your associates are living in, and you have an obligation and a responsibility to try to give them a— to be a part of the improvement of the community. And B, the country doesn't work well if business doesn't engage in some of these problems, that we have a unique vantage point. And so engagement is really, really important. I, in fact, went— I spoke at something called the Advanced Leadership Institute a number of years back at Harvard about this particular issue, communities of health. There's a course where there's a video of me also talking about this with the mayor. In terms of engagement? I think a couple of things. One is we don't do it so that anybody will particularly buy stuff from us. It's part of the corporate culture. People do like to know that the companies that they're doing business with have a moral sense and it's not just about maximizing the dollars into the owner's pocket at the profit is a good thing and it is important for the stability of companies, but there has to be this community viewpoint as well. And so for me, my job has in fact changed over the last couple of years because I own corporate CSR personally as an initiative at GEM, and there's a lot of pieces to this. But thinking about where we're going to engage in the community and what that looks like, monetarily, time, energy, various kinds of support. And I think it's given the culture that we have, and frankly, I'll throw one over to Jeremy and Sanmar, I view them as having the same culture and values. I had a long conversation with Marty about the homelessness problem in Seattle, and it's something that never made the trade press, but he was clearly quite, um, I would say engaged and animated about trying to figure out how to solve the problem. And you need smart people who have some resources who are interested in the problem from the business community to get it solved. And I think it's just a part of who we are, uh, and I think it's important for the people who work at any company, uh, there's a lot of people who want to know that their company is interested in doing some good things.

It's interesting, encouraging, and also challenging, but how much, what percentage now of conscientious CEOs' time is spent on these initiatives? It's crucial, but it is a huge amount of time. Jeremy, you created a Canvas for Good. It's a brilliant website. It features the intentional aspect of your community and sustainable efforts. And one such intention is the Better Buying Initiative. Now, we're all distributors. We are used to thinking of SanMar as a supplier, but SanMar works with factories all over the world as a buyer. Can you tell us about that initiative and why you implemented it.

Yeah, so, so Better Buying was, it was an organization that basically gave us feedback on how we were doing as a, you know, as a customer. And again, we think of the entire supply chain, like we want to be a partner both to our suppliers and to our customers. And so getting that feedback was really important. And then You know, being able to publish that was something that was really interesting to us, to be able to add that transparency of like, here, how are we as a buyer? We did some work this year on kind of our purpose as an organization. We came up with this idea of creating lasting connections that elevate lives. That's the purpose of SanMar. We're going to show up at the trade shows this year with it, wearing a t-shirt that says, this is not a t-shirt. And we have a campaign kind of around this is not a t-shirt. And the idea is that this is so much more, that it creates lasting connections that elevate lives. The connections between people who wear it— when you're part of a team, a club, a school, an organization— like, those connections are important. That community is important. And elevating lives of the people around the world who make our products, the SanMar employees, our customers and their businesses, and the people who wear our product, and it's, and it's so much more. And so we recognize, like, we're going to make these, like, big statements about what a t-shirt does, you know, intuitively. I, I mean, I, I recognize we're not curing cancer here. At the same time, like, for us, making a, a bold statement about the value of what we do and how that having that purpose is something that inspires us, it's something that brings employees to SanMar, it's something that we hope inspires our customers because they're part of this. And, and at the end of the day, we actually think it's really real. And I've seen it, I've seen it around for the people around the world and, and, and whose lives we're able to make better. I've seen it for our employees, and I've seen it for our customers and being able to enable them to like build their business and grow their business and how we do that together and elevate people's lives. There's a real mission and a purpose that that we have as a business. You know, we are— we signed on this year to create science-based targets for carbon reduction. Like, this is a huge initiative for us as an organization to think about sustainability in a totally different way. And if I'm totally honest with you, I don't know how we're going to achieve all the targets that we will have to hit in the next 10 years. And I would say that as most companies and as the world. But we also understand the, the need. And we are all as a kind of global community going to have to become really innovative around how we do some of these things. And so that's something that's really important to us. And how do we do that at the same time when we're building up the communities and the people who build our products? How do we do that so that we can service our customers well and be able to bring great quality products to the industry? And to really live that, you know, that purpose of creating connections that elevate lives. And so that's something that's, you know, inspiring for me. And frankly, for most of us at SAMHSA, it's why I show up in the morning and come to work. And that purpose, you know, like Jonathan said, like, we need to make a profit. We need to be able to do it. Those things are important. Are obviously important, but our purpose, we think, is bigger than that, and it's something that we really lean into.

Yeah, SanMar has been such a highly respected voice in that regard, in inspiring us and leading us. Jonathan, I had one question on sustainability because we could spend a lot of time talking about this topic.

Before you go into that, can I just say that it's funny that Jeremy's about two steps ahead of us on this whole purpose thing. I actually— there's a— we also have a similar initiative going on with one of our board members leading it around purpose. And I think it's important and talks to culture at both organizations in terms of things like purpose. And I think that neither organization's purpose is going to be maximize shareholder value or the largest EBITDA, but it's something beyond that. In terms of the purpose for both organizations. And I had no idea they were working on it as well.

So kind of funny. Well, and this lines up with all of the research that's happening with B2B buyers as well as consumers that are driving this. But Gen Z is a far more conscientious buyer, and those buyers are stepping into really critical roles.

I know at—

when I was a distributor, we sold program business to large B2B clients, and we were often selling to folks in the 20 to 30 year range. And those folks, they are far more intuitive, they're far more conscientious, and they want to know they're— the people they're partnering with have the same kind of passion. One quick question on sustainability. In 2020, 19% of new products that you introduced at Gemline were eco-friendly. But there's one— you've had multiple initiatives with with carbon emissions and things like that, but one initiative that sort of flew under the radar is to eliminate PVC from your product line. Can you break down for me, the neophyte, why that's such a crucial initiative?

Well, it's funny because if you look at brands like Nike or Adidas that we think about as these big forward— and sure, let's take Patagonia out of that. None of them, I mean, you're not going to find a lot of PVC in their lines. It's a When we think about sustainability, we think about things like reuse, we think about how it's made, we think about its disposal. PVC is not great in any of those. It's a chemical that we can really— I don't want to say we can do without, it has a purpose, but I think that we can do better in terms of a more sustainable future. In terms of lift, we're trying to measure right now, one of our jobs is to measure our carbon footprint. Which is, I mean, talk about a head-scratcher on this, and we're in the middle of that whole project. Jeremy's is even more complex just given the scale of his organization in terms of, in terms of all of this. But for us, we are, we, we think we can do something better to lead towards a more sustainable future, and we think that We have to get there eventually, and it really is compatible with who we are. I hope we move the market eventually with some of the stuff that we're doing. I wrote down some of the things that Jeremy is doing, frankly, to bring back with our initiative. If he steals from us and we steal from him in terms of trying to make the world a better place, it's not a It's not a bad thing. These are places where we all have to figure out how we're going to work together to solve these problems, because what we're doing today is just not sustainable. We're also working with some of our brand partners where they want to do something, they can't do it on their own potentially, and we may be able to work together with them to add additional volume to be able to get something done. In this area. And we also learn from them in terms of what they're doing and how we can apply it to our business. Yeah. So we'll see. It is a huge, huge, huge lift. It's a multi-year initiative. But we are— we have to figure it out.

Yeah. Jeremy, thoughts before I move on?

Yeah, no, I mean, I just think, you know, our focus beyond adding continue to add more products that are sustainable in terms of completely recycled product. I think for us, it's really how do we make the whole supply chain more sustainable. For us to get to the carbon reduction targets that we need, we have to have factories that are running on renewable energy. We have to be thinking those type of things, and it's not Sandmarc, it's our supply chain where the largest environmental impacts are. I can put LED lighting in my offices and that's great, but I really need to have that garment factory in Vietnam running on sustainable energy and how do I get them there and how do I use our buying power? That's a huge piece where we'll focus over the next 10 years. Yeah.

As we're wrapping up here, I never do this, but you are both ideal for this. I would love to know what you would like to ask each other. So Jonathan, let's start with you. Do you have a question for Jeremy?

I have two questions. The second one's an easier one, but it's informational just on Jeremy himself. But so two things. One is, how does being a privately held family business— and it's two different things, privately held and family— impact the way that you think about both SanMar and the industry and the way that you approach it? And then the second question is, if, if, um, I'm curious as to whether you as a kid always thought about running SanMar, or you dreamed of being— and let's use the 5-year-old dream— of being an astronaut or something like this, or thought, I'm going to be a something else when I grow up?

Yeah, I'll answer the second one first. My dad did a really good job of getting us in. SanMar was a small business when we were kids, and we were involved in like a fun way. I mean, I had like, you know, there was a guy who worked in our warehouse who was like a black belt in karate, and he did like my third birthday party, like in our warehouse, and it was a karate party. But I, so like, I literally never, I never really had a different vision than wanting to have the job that I do today. It was always what I wanted. You know, I'm glad I worked outside the business for a while. I mean, that was important to me to know that I could be kind of successful outside of our family business, but it's always what I wanted and always just part of our family. In terms of how I think about being a family business, privately owned, I think being a family business especially allows us to take a really long-term approach to the way we think about kind of the industry. There's, you know, we never really talk about this quarter or this year. I'd rather get an order on January 1st than on December 31st, because then I get another year to pay taxes on it. Like, I don't, I don't have those pressures that I think if you're running private equity or public company, something that you need to sell, I think that really helps. I have patient capital because my parents and my brother own the business with me. I have that type of level of support, and I think it helps us make make better decisions. And I think being privately owned has allowed us to have significantly less leverage than many of our competitors. And I think that is a really helpful thing in any business, especially during challenging times. Leverage is great when things are going up, and it's really hard when things are going down. And I think that that is, you know, something that we really were thankful for, kind of in in 2020. So my turn, I get to ask Jonathan.

Yeah, Jeremy, you get to ask Jonathan a question now.

Oh, good. So, John, I shared earlier, kind of, for, for me, that purpose is, is kind of what gets me up in the morning, gets me wanting to go to work. What is it that really motivates you at this point in your career to want to show up and work hard every day?

Yeah, I always say the same thing, and it's going to sound corny, but if you go back to my office, you will have— people have heard me say this, but it's really the people that I work with and the community that we work in. The— I'm going to start with the people that I work with. We're really fortunate. We have some great people who work in our organization, really dedicated people who have been around Many of them have been around a really long time. I mean, we have— it's not unusual to run into people with 20, 30, and even 40 years of tenure at the company. And you get to know them as people. We don't— I don't— people know at Gem that I detest the word resources. We don't have resources working for us. We have people with families, with mothers, fathers, brothers, sisters, kids. Who have hopes and dreams and a backstory. And to be a part of that, I think, is, uh, it's, it's fun, it's meaningful, it's interesting. It's not always easy. I mean, don't get me wrong, like anything else, just like being in a family business isn't always easy, it has its ups and downs. Um, but by and large, it's, um, it, it is, it's, it's fun and rewarding. And the community that we're in is a gateway community, meaning that there's a lot of immigrants who have skill but haven't had as much opportunity. And the ability to do some good work in the community with people who have a lot of energy and zest and who are— who just work really hard for everything that they get, and they do it with oftentimes a lot of joy and optimism, is really rewarding as well. It was, you know, I was talking to the Boys and Girls Club because we're doing something pretty significant there right before I got on this. And those are fun conversations to have. And so that, that makes getting up and heading to the office really worthwhile.

Last question, it can be brief, but what— you're both such big thinkers, readers. What book, podcast, topic, or resource did you read in 2021 that has had the most biggest impact in reframing how you think this year? Jonathan, we'll let you go and then we'll let Jeremy have the last word.

It wasn't a resource, it was my kids. So I have a bunch of 20-something kids. I have a son who's a consultant, a daughter who's in medical school, and my younger son's in autonomy, things that sort of think for themselves, quote unquote. And just hearing the world through their eyes and experiences has been quite impactful in terms of how they think about the market, how they think about jobs, the hopes and dreams of them and their friends has had a bigger impact on me, I think, this year than anything that I've read or listened to on the radio.

Hmm.

That's saying a lot because I know how much you read.

Jeremy, how about you? You know, I had a different answer, but I love Jonathan's because it is, and I might steal it. You know, I have, my kids are younger. My oldest is now 19. I used to joke that everyone should have a 17-year-old daughter at home because you learn so much watching how that generation communicates and talks and shops. And it is fundamentally different than how we do. And now she's 19 and she's in college and my next is 15. So she's almost there. So I'm lucky I've got another daughter to help guide me, but you do, you learn an unbelievable amount. From your kids. I love reading historical fiction. That's kind of the genre that I like the most. I love reading biographies. I don't tend to read a lot of business books. I'd rather— I feel like they're pop business and I'm not sure they give as many value. I'm inspired more by great people who've done amazing things and I love learning about them. So that to me is where When anyone asks me for a business book recommendation, I said, I'm like, you know, who do you really admire? Go read their biography. You know, to me, that's something I tend to learn more from that.

But yeah, yeah, go read Dostoevsky to learn about human emotions.

There you go.

Absolutely.

Yeah.

Yeah.

Well, thank you both for spending the time with us. It was really an honor to have you both in the same room. I know you hate that phrase, it was really an honor, but it really was. I enjoyed it. Thank you for helping inspire and educate everyone. And We'll see you soon. I guess we'll see you in a couple, a couple of weeks, actually.

We'll see you soon.

Thanks, Bobby. Thank you. All right, guys, take care.

Thanks so much for tuning in to this episode of SKU Cast. Be sure to keep up with our latest content by subscribing to SKU Cast on iTunes or to our blog at community.commsku.com. Until next time, friends, thanks so much for listening.