Industry

Derailed By Coronavirus, A Corner Of The Food Industry Questions The Future Of Its Biggest Event

A Boomchickapop booth at Expo West in 2015, two years before it was acquired by Conagra for a reported $250 million.

The so-called Superbowl of the natural products industry has been canceled and the coronavirus is to blame. Expo West was set to draw close to 90,000 of the industry’s faithful, including some of its most influential figures, who were preparing to gather in Anaheim for five days of sampling vegan cheese and mingling closely with grocery buyers, investors, distributors and entrepreneurs, including mom-and-pop aspirants and Kind Bar billionaire Daniel Lubetzky.

The whole thing came to screeching halt Monday at 8 p.m. EST when New Hope Network, the show’s producer for four decades, announced it was officially postponing the event due to fears of spreading the coronavirus. With registered attendees from 100 countries, many had likely already landed in California.

The event’s drawn-out demise, which unfolded in real time on social media, offers a snapshot into the chaos the global outbreak is causing across the business world, which included Google and Microsoft canceling upcoming events, and a coordinated effort from central banks in the U.S. and around the world that failed to calm stock markets, which tumbled more than 1% in the U.S. for a twelfth day.

The stunning reversal came after New Hope had sent two separate letters to registered attendees over the weekend confirming that the show would go on, the last one at 1 a.m. EST on Monday, when the company said show attendance was likely to be down 40% to 60%. “Despite the decreased attendance, we believe there will still be a robust level of activity throughout the Expo West campus,” the open letter from New Hope executives read, “and we are hearing from exhibiting companies still planning to attend that they are looking forward to connecting with their peers and doing business while in Anaheim.”

Over the weekend, registered attendees mined LinkedIn threads that updated lists of companies rumored to have dropped out, while others commented on their own changing travel plans. Who would still be attending? Have you heard Whole Foods and Vital Farms had dropped out? A thread from prominent investor Wayne Wu, a partner at VMG Consumer Partners, had more than 900 comments and 200,000 views by Monday evening.

“We were a sounding board,” Wu told Forbes on Monday, noting that as cancellations mounted from grocers, strategic acquirers and industry investors were forced to weigh whether attending the show made sense well into the weekend. “It became clear that there was not a centralized forum for people to discuss this topic, which is a very tough and difficult decision.”

Brands also began reporting in real time that New Hope wasn’t planning to offer refunds for booths secured months ago, leaving many startup founders hungry for the exposure to decide whether they would risk the health of their teams as the benefits of attendance began to evaporate. Many small entrepreneurs had already paid thousands of dollars, huge percentages of annual budgets for some, to bet on a chance at having the right meeting at Expo that could lead to a shot at distribution or an investment toward another production run.

The show floor at New Hope Network's annual Expo West in Anaheim spans multiple hotels and stadiums.

The show floor at New Hope Network’s annual Expo West in Anaheim spans multiple hotels and stadiums. … [+]

WIREIMAGE

With recent nine-figure acquisitions of family-owned companies like Perfect Snacks, along with new billionaires emerging like kombucha king GT Dave and Kind Bar’s Lubetzky, who can blame them?

Even more unsettling was the undercurrent of a much bigger fallout that emerged, as the industry openly questioned New Hope’s influence within the natural products industry. British data and events conglomerate Informa, which trades on the London Stock Exchange with more than $3.6 billion in annual sales, acquired New Hope and a few other events companies as part of a $1.56 billion deal in 2016, with Expo West being one of its biggest annual events in the U.S. With New Hope stock down 23.5% this year, many wondered whether New Hope was putting profits above customer safety.

Kind Bar’s Lubetzky was the most prominent to voice concerns, publishing a post on Monday titled “We Need to Talk: why KIND won’t be at Expo West, and why the Natural Foods community may need to re-examine our relationship with the organizers.”

“I remember when I was getting started, how critical it was that we, at a minimum, find a way to cover our costs and get enough business from this show. It was a question of survival,” Lubetzky, now worth an estimated $1.1 billion, wrote. “It was expensive back then, and the costs of participation have risen dramatically over the years.”

As the 843-word piece continues, Lubetzky compared the costs for Expo West to the Specialty Food Association’s biannual Fancy Food Show. Since it’s run by a membership-based trade group, it charges “a fraction” of the price. “Even without CV19 and all the numerous cancellations from a vast number of retailers, the investments our community makes into this show are often hard to justify,” Lubetzky wrote. “Consolidation among retail chains has significantly changed dynamics in the natural foods space. The show organizers act as a monopoly that squeezes entrepreneurs at every step. New Hope is there to serve itself, and thus its policies and terms are so much more onerous—including techniques to upsell.”

He added that the SFA gives “priority based on seniority—so even if you are a small company, if you’ve been exhibiting for a while, you get to choose your booth early; but Expo’s system insists you set up ever bigger booths because otherwise you lose priority to choose your booth location.”

In bold, he asserted: “Facing any monopolist is intimidating.”

The cofounders of nutrition beverage brand Lifeaid, one of whom is a medical doctor,  planned to pass out 3,000 branded surgical masks at Expo West, which ended up being canceled on Monday evening.

The cofounders of nutrition beverage brand Lifeaid, one of whom is a medical doctor, planned to … [+]

LIFEAID

Lubetzky could not return Forbes’ interview requests, before or after New Hope announced it would postpone Expo West after all. In its message late Monday night, New Hope promised to have a rescheduled date by mid-April, in addition to creating a $5 million fund to support earlier-stage entrepreneurs dealing with financial hardships caused by the postponement. But the points Lubetzky brings up are felt by small entrepreneurs across the industry.

“It’s time to revisit even just the scale of these events. It’s unwieldy,” says Arthur Gallego, a food and beverage industry consultant whose clients have sunk costs ranging from $15,000 to $200,000. “You can’t manage to cover it successfully even in two days. People are fired up to start a new version of this.”

Cofounder of rePlant Capital Robyn O’Brien wants to see the industry create smaller shows that are more affordable. “Entrepreneurs are the lifeblood of our industry,” O’Brien says. “Almost like speed dating, the buyers and retailers can host events rather than having founders spend a small fortune out of their budget on a huge trade show with all the environmental impacts that come with it.”

[“source=forbes”]

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Loknath Das

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