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KINSIP: FROM SPIRITS TO SANITIZER

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Geoffrey T. Pond and Nicole Bérubé wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.

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Copyright © 2022, Ivey Business School Foundation Version: 2022-07-12

In the spring of 2020, as the COVID-19 pandemic took hold, the Kinsip House of Fine Spirits (Kinsip)
found itself in a position to take on an urgent challenge. Hand sanitizer shortages were looming, and the
need was becoming critical due to the extraordinary precautions health care workers had to take to protect
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themselves and prevent the spread of the virus. As a pediatrician at Belleville General Hospital, Kinsip
partner Sarah Waterston was experiencing the situation first hand. Worried about the imminent shortage of
protective and disinfectant supplies for front-line health care workers, she also knew that Kinsip could help.
As a distillery, Kinsip produced an essential ingredient for hand sanitizer—ethanol. By mid-March, Sarah,
her brother Michael, and his spouse, Maria—the three co-owners of Kinsip—had committed to making
hand sanitizer to distribute free of charge to front-line workers. Once they reached this objective, they hoped
to produce enough hand sanitizer to offer the product for sale to the greater community and the public.
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The three Kinsip partners had committed firmly to this objective and the vital role their business could play
in keeping people safe through the COVID-19 crisis. However, making hand sanitizer rapidly would be a
considerable challenge for a distillery that had been established to produce fine spirits over the longer term.
In response to the demand created by the pandemic, Kinsip would have to use all of its production capacity
to help provide hand sanitizer. The three partners needed to figure out how to make the sanitizer, manage
production, and handle distribution while respecting regulations. They knew that if they wanted to help the
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community, they would have to act fast. Belleville General Hospital needed to know whether Kinsip had
sufficient capacity to meet the hospital’s demand. Maria wondered what would be the extent of Kinsip’s
capacity to produce hand sanitizer, after dedicating all production to this venture. How should production
be scheduled? What was Kinsip’s daily capacity to produce hand sanitizer?

KINSIP DISTILLERY BACKGROUND

In 2011, Sarah, Michael, and Maria purchased 66 Gilead Distillery, located at a farm in Prince Edward
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County, Ontario. The three partners shared a keen interest in the local area and in the idea of producing fine
local products. They also benefited from Maria’s expertise. She was a third-generation distiller with a
lifetime of knowledge in the production of spirits. The distillery was originally named Kinship, to reflect
the family connections of the three business partners, but the business name was eventually confirmed as
Kinsip House of Fine Spirits, to denote the unique nature of the products, which were meant for sipping

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and savouring. Kinsip operated as a craft distillery based on the idea of “grain to glass,” a phrase that was

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analogous to the more common term “farm to table.”

On its 80-hectare farm, the company cultivated the wheat, grain, rye, and barley used to produce its spirits—
a distinction that few distilleries in Ontario could claim. This also provided an ample and reliable supply of
grains to support the distillery. All production took place on the premises. Kinsip also established

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community relationships by procuring other elements of their spirits—such as black currants, lavender, and
maple syrup—from local producers.

Kinsip produced 11 spirits, including rum, rye whisky, gin, brandy, and vodka. The spirits were combined
with unique flavours sourced from the immediate region. The names of the products (e.g., Maple Whisky,
Woodland’s Whisper Vodka) alluded to the company’s production mantra. Kinsip sold its spirits directly
to consumers at the farm and through the liquor and wine stores operated by the Liquor Control Board of

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Ontario. In addition, Kinsip produced non-alcoholic products (e.g., bitters and maple syrup aged in whisky
barrels), which were sold at the farm and distributed for sale at various boutique outlets in the region.

The production of ethanol at Kinsip followed a unique distilling method (see Exhibit 1). Kinsip first milled
the grains collected from the surrounding farmland in its mill. This process took approximately three hours,
after which 2,000 kilograms of milled material was ready for mashing in Kinsip’s 4,000-litre mashing tank.
The six-hour mashing process converted the grain starches to the sugars required for fermentation, which
was a four-day process, in three 2,000-litre tanks. At times of peak demand, Kinsip could also use its
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mashing tank for fermentation, if it was available. During the fermentation process, the sugars were
consumed by the yeast, thus producing alcohol. At the end of the fermentation process, the solution
contained 8 per cent ethanol, which would be heated in Kinsip’s 1,000-litre still. At this point, the alcohol
evaporated into a gaseous form and was condensed in a condenser.

A first run through the still (called a “strip run”) produced a concentration of 30 per cent alcohol by volume
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(ABV). A second run through the still (called the “vodka run”) elevated this level to 92 per cent ABV. In
each of the strip and vodka runs, 10 per cent of the ethanol remained in the solution in the still kettle. This
was the solution that did not evaporate or get condensed in the condenser. At each of the strip and vodka
runs, the solution remaining in the still kettle was simply discarded. Distillation was followed by infusion
or blending to obtain the distinctive flavours among Kinsip’s various products. In the final stage of the
process, the product was bottled. This final stage was very quick and avoided constraining the distillery’s
capacity to produce more spirits.
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THE COVID-19 PANDEMIC

Typically, the end of winter at Kinsip was devoted to planning the cultivation of the farmland to support
the year’s distilling operations and to prepare for product tasting groups that would be visiting the farm
during the tourist season, from May through October. During that period of the year, Kinsip employed as
many as a dozen people. However, in March, Kinsip was still operating at low-season levels, with only
three employees—a retail manager in the front room, a lead distiller in the back room, and an assistant
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distiller also in the back. On March 17, 2020, the Province of Ontario declared a state of emergency in
response to the outbreak of the COVID-19 pandemic, which had been announced one week earlier.1 By

1
Office of the Premier, “Ontario Enacts Declaration of Emergency to Protect the Public: Significantly Enhanced Measures Will
Help Contain Spread of COVID-19,” Province of Ontario, news release, March 17, 2020
https://news.ontario.ca/opo/en/2020/03/ontario-enacts-declaration-of-emergency-to-protect-the-public.

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early April, personal protective equipment and supplies (e.g., masks, hand sanitizer, rubbing alcohol) had

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become nearly impossible to find in stores.

THE SHIFT TO MAKING HAND SANITIZER

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At Belleville General Hospital, Sarah had experienced the situation directly. She worried about an imminent
shortage of protective and disinfectant supplies for front-line health care workers, but she realized that
Kinsip produced an essential ingredient for hand sanitizer—the ethanol obtained at the end of the vodka
run. Sarah suggested to Michael and Maria that, to support front-line workers and the local community, the
distillery could temporarily transition from creating specialty spirits to producing hand sanitizer. All three
partners wholeheartedly agreed to do whatever it would take to help their community through the crisis.
However, none of the owners or employees had experience in the production of hand sanitizer.

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The World Health Organization (WHO) recommended that a batch of hand sanitizer be made by mixing
8,333 millilitres (mL) of 96 per cent ethanol, 417 mL of a 3 per cent aqueous solution of hydrogen peroxide,
145 mL of 98 per cent glycerol, and enough water to make the total volume 10 litres.2 The result, measured
in terms of volume, would be a solution containing 80.00 per cent ethanol, 1.45 per cent glycerol, and 0.125
per cent hydrogen peroxide. The ethanol would act as a disinfectant, the hydrogen peroxide would sterilize
the packaging, and the glycerol would act as a humectant to attract and retain moisture. The WHO also
recommended that the density of the final product be tested to determine its ethanol concentration. The
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WHO document did not indicate the range of acceptable concentrations of the three ingredients.

The three partners immediately realized that their primary area of expertise would enable them to make
hand sanitizer. They could readily produce ethanol, the principal ingredient. However, they would have to
acquire glycerol and hydrogen peroxide on the open market, which posed a challenge. Traditionally, the
Kinsip partners had taken great care in selecting local suppliers and developing strong supplier relationships
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over the long term. However, the urgent need for hand sanitizer precluded this approach, so Maria spent
hours on the phone calling numerous potential suppliers. Finally, she was able to procure approximately 90
litres of glycerol and about 60 litres of hydrogen peroxide, each satisfying the purity requirements stipulated
by the WHO. At the peak of the supply shortages, the lead times for hydrogen peroxide and glycerol were
approximately eight weeks.

Containers for the hand sanitizer posed another problem. The typical glass bottles used for the company’s
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spirits seemed like a poor choice for the hectic environment of hospitals, long-term care homes,
ambulances, and first responder vehicles, where the products would most likely to be used. The packaging
issue created a significant new challenge for Kinsip. Using a custom-designed plastic bottle would require
finding the right supplier, designing and fabricating new moulds, testing the production process, and finally
producing bottles on a large scale. This option would be costly and time consuming. Therefore, the partners
opted for finding an existing product that was already in production.

Maria again scoured the Internet for the ideal product. Many plastic bottle suppliers seemed to be available
overseas, but the long lead times associated with overseas procurement did not meet the urgency they were
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facing to get the product to consumers. Pandemic emergency measures in many affected countries had also
curtailed or shut down production in many industries around the globe, so Maria focused her search on a
suitable North American supplier.

2
World Health Organization, Guide to Local Production: WHO Recommended Hand Rub Formulations, May 5, 2020,
https://www.who.int/publications/i/item/WHO-IER-PSP-2010.5.

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Maria was successful in locating the right bottles to contain the hand sanitizer as well as suitable caps with a

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safety seal, which were available from another bottle vendor. However, Kinsip’s capper machine was designed
strictly for glass bottles. The option of sealing the caps onto the bottles by hand was not reliable. Fortunately,
Kinsip was able to procure a suitable capper through a temporary loan from another distillery in the region.

Health Canada strictly regulated the production and distribution of hand sanitizer, which it identified as a

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“natural health product.” Consequently, both the production and the distribution of sanitizer were subject
to the same level of scrutiny as vitamin supplements, homeopathic and Chinese medicines, and probiotics.
To produce hand sanitizer, Kinsip required a site licence; to distribute it, Kinsip required a product licence.

Recognizing the urgent requirement for hand sanitizer, Health Canada introduced a streamlined and
expedited interim approval process for distilleries, in response to the unprecedented need for hand sanitizer
during the pandemic.3 As a result, applicants did not have to provide the typical stability testing that was
normally required to confirm that the product’s quality would not change over time. As well, Health Canada

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paused the requirement for a quality assurance report detailing operating procedures, ranging from
production to sanitation, and various tests for microbiological contamination.

However, Health Canada continued to expect applicants to adhere to many strict regulations and to attest
to this adherence in their applications to the ministry. The interpretation and implementation of these
regulations to the production and labelling of sanitizer posed unique challenges. Although the application
for site approval was only a few pages long, it required that the applicant follow one of four similar
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policies—each one over 10 pages long.4

The three co-owners contemplated how they would navigate these challenges. They remained committed
to supporting their community by providing a health product that they were well suited to produce, but the
challenges were stacking up. It was not going to be a simple matter of mixing the three constituent
ingredients as directed by the WHO. It would take time to obtain the required materials (i.e., glycerol,
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hydrogen peroxide, bottles, caps, and labels) and equipment (i.e., a bottle capper). Regulatory approval by
Health Canada could then follow, but that would also take time. Numerous questions remained: What is
Kinsip’s capacity to produce hand sanitizer? What production schedule should be followed to maximize
output? How could the packaging issue be resolved? How would the company navigate the approval process
that Health Canada required?
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3
Natural and Non-prescription Health Products Directorate, “Licensing Approach to Produce and Distribute Alcohol-Based
Hand Sanitizers: Guidance Document,” Government of Canada, July 13, 2020, https://www.canada.ca/en/health-
canada/services/drugs-health-products/drug-products/applications-submissions/guidance-documents/covid-19-expediated-
licensing-alcohol-hand-sanitizer.html.
4
Natural Health Products Directorate, “Site Licence Application Form,” Health Canada, accessed March 31, 2022,
https://www.canada.ca/content/dam/hc-sc/migration/hc-sc/dhp-mps/alt_formats/hpfb-dgpsa/pdf/prodnatur/form_sl-dle-eng.pdf.

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EXHIBIT 1: THE PROCESS OF PRODUCING ETHANOL AT KINSIP HOUSE OF FINE SPIRITS

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Source: Created by authors from company files.

Note: kg = kilogram; ABV = alcohol by volume.
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