In early February, executives at Bollman Hat Co. came up with a contingency plan to cope with Covid-19 as the disease was beginning to spread across the U.S.
The plan has been playing out over over the last six weeks as the company scrambles to stay alive despite being almost entirely shut down, says Don Rongione, president and CEO of Bollman, which is based in Adamstown, a borough in northeastern Lancaster County.
Online sales are still flowing. And the company started making and selling face masks. But revenue is 10% of what it was before the pandemic, Rongione said.
If Bollman can’t return soon to full production, Rongione worries the furloughs and salary cuts of the last six weeks may not be enough.
“No business can survive very long when 90% of its revenue is cut off, unless that 10% that remains is hugely profitable, which is not the case,” Rongione said.
How much longer?
Pennsylvania’s economy is awakening this month under a color-coded approach that allows some commercial activity to resume. Two dozen rural counties in northcentral and northwestern Pennsylvania will be the first to go starting May 8. It’s not clear when more populous Central Pennsylvania counties like Lancaster will get their turn — and companies like Bollman can start getting back on their feet.
Founded in 1868, Bollman has persevered through repeated economic downturns, with executives and employees motivated by a desire to leave the company in better shape than they found it, Rongione said. The company has been employee-owned since 1985, with the employee stake now at around 70%. The rest is held by six managers, including Rongione.
When 2020 began, the 62-year-old Rongione was preparing to hand off a thriving company and retire. He has been president and CEO since 2002.
Bollman has paid down about 60% of its debt over the last few years, helped by the sale last year of a distribution center in East Cocalico Township. The company made enough money in 2019 to issue profit-sharing checks for employees for the first time in four years. And Bollman sunk $800,000 into its employee-stock ownership plan, Rongione said. He declined to share revenue.
Rongione has not publicly named a successor, but he had been hoping to step down in two or three years. “Now, I’m not sure,” Rongione said.
Bollman did not make the cut as a non-essential business when Gov. Tom Wolf initiated broad shutdown orders the week of March 16. By March 20, Bollman’s roughly 200 employees in Adamstown were no longer coming into the factory. Hourly production employees were furloughed, while staff that could work from home took pay cuts if they earned more than $50,000 per year, Rongione said. The company has about another 50 employees facing similar constraints at various operations in New York, Texas, Asia, Australia and Europe.
The company applied and was approved for a Paycheck Protection loan. Backed by the U.S. Small Business Administration, the low-interest loans convert to grants if they are mostly used for payroll. But Bollman expects it will need the money to sustain its cash flow, Rongione said.
The company’s customers have been slow to pay, even for orders shipped before the pandemic. They are trying to preserve their own cash, Rongione said. “Many of our largest customers are department stores that stopped paying us.”
Even though it couldn’t pay hourly workers, Bollman started an employee relief fund and raised about $50,000. Each furloughed employee got a check for $250 to tide them over until their unemployment benefits kicked in. The fund also paid the employee portion of their health insurance, which was extended through May 16. Depending on the situation, coverage may be extended again.
“It’s that balance of trying to think with your heart and your head, and it affects your stomach,” Rongione said. “It’s very challenging. And as this goes on, we make increasingly difficult decisions.”
The company’s pandemic plan moves through four colors, from green to red. The company is approaching the red, Rongione, which could involve permanent layoffs and selling off hat brands to raise cash. Its brands include Kangol, Helen Kaminski, and the online site hats.com.
But amid the tough calls, there has been a glimmer of hope. Someone on Facebook suggested in March that Bollman try making face masks from wool felt, the material it uses to make hats, Rongione said. A product manager grabbed some material from the factory and went to work developing a prototype using her own sewing machine.
Managers and other salaried staff started coming in to the plant to make masks by the week of March 30. By the last week of April, Bollman was able to recall about 25 hourly workers to join in the effort on a voluntary basis. They are following social-distancing guidelines and assessed before coming into work each day.
To make the masks, Bollman is using excess pieces of wool, including discolored hat bodies and material trimmed from finished hats, Rongione said.
The material had been sent to landfills. But about 12 years ago, Bollman began storing it and looking for buyers who could fashion it into new products, such as insulation and plant holders. The upcycling efforts met with some success, and Rongione had been hoping to step them up this year. The pandemic put a halt to those plans.
Now, Bollman is selling its masks online and to local businesses. The retail price is about $30 for two and $50 for four (with the company temporarily offering a free mask with every hat purchase). Businesses pay $10 apiece, with a discounted price of $8 per mask on orders over 500, Rongione said. A little more than 1,000 masks have been sold so far, Rongione said. The company also has donated some to a homeless shelter in Reading called Opportunity House.
One challenge lies in explaining the potential advantages of wool masks. Both wool and cloth can be washed and reused. But unlike cloth, wool has natural antimicrobial properties and better filtration. Rongione said. The company is awaiting final lab results that would back up its claims and spur more orders.
The bigger challenges still loom. Even if mask sales take off, they will make only a small dent in Bollman’s lost revenue, Rongione said. But it is one of the ways he and the company’s employee-owners hope to sustain operations while they hope for an all-clear signal.
“As good stewards, we have to allow this company to continue,” Rongione said.