When Mergers Ruin the Show
By Margo McCall -- Tradeshow Week, 4/19/2004
Investors often cheer the merger of two companies. But if those companies are major exhibitors, it could be a warning that a wave of consolidation is about to hit your tradeshow.
For the Food Marketing Institute, that warning came on the cusp of its May 2000 The FMI Show, with news of British food conglomerate Unilever's $24.3-billion acquisition of Bestfoods.
"That tripped about an 18- to 20-month process of major manufacturing consolidation," said Brian Tully, a senior vice president with the Food Marketing Institute. "Unilever's acquisition of Bestfoods was the start. I remember it as clear as if it was yesterday."
At the time, Tully said, he had no idea that the deal would unleash a surge of mergers that would eliminate many of his show's exhibitors. He was fairly certain that Bestfoods would share the Unilever booth.
That was also the case later in 2000 when Kraft Foods owner Philip Morris snapped up Nabisco Foods, which had occupied a 4,500 square foot booth. "We were left with 4,500 square feet to sell to someone else," Tully said. "While we once had two large branded companies in separate spaces, they have folded together and become one. FMI has become the one that has had to bite the bullet on that."
Where once there was a diversity of supermarket chains, three behemoth retail food buyers now dominate the market. Albertson'sacquired Seesel's andAmerican Stores grocery chains in 1998and the Shaw SuperMarket andStar Markets chains last month.Kroger bought the Fred Meyer chain for $13 billion in 1999. And Safeway's acquisition spree includes the Vons supermarket chain in April 1997, Dominick's Supermarkets in November 1998, Carr-Gottstein Foods in April 1999, Randall's Food Markets in September 1999 and Genuardi's Family Markets in February 2001.
Tully said food manufacturers have reacted to these events in order to remain competitive. "As our retail members have consolidated, so have our manufacturers. Some of our biggest exhibitors have consolidated to match the clout of the bigger retail companies. That certainly has impacted our show," he said.
Between 2001 and 2002, FMI's annual show shrank from 517,000 net square feet, 1,300 exhibitors and 29,000 attendees, to 420,000 net sq. ft., 1,066 exhibitors and 24,500 attendees.
Tully said he is stabilizing the show by collocating events in growing food sectors. Four other events will be collocated with The 2004 FMI Show, scheduled for May 2-4 at Chicago's McCormick Place: the Natl. Assn. for the Specialty Food Trade's Intl. Fancy Food & Confection Show,Diversified Business Communications' All Things Organic Conference & Trade Show,the United Fresh Fruit and Vegetable Assn.'s United Produce Expo & Conference and the National Assn. of State Departments of Agriculture's U.S. Food Export Showcase.
FMI has also established a Healthy Living Pavilion, which includes low-carb products. Also at McCormick Place the same week is a supermarket pharmacy conference.
Collocating has enabled FMI to maintain its dates and location at McCormick, a choice venue since Chicago is home to a large number of FMI members. Sometimes, as shows shrink, they're pushed aside so venues can book larger, growing shows. "You do lose a little muscle, yes. Your voice gets squeakier. It's all about how many people you bring into the city, how many heads you put in the beds," Tully said.
The food industry isn't the only one that's experienced consolidation. The California Cable & Telecommunication Assn. was forced to mothball The Western Show after 36 years due to mergers in the cable industry.
Dan Dobson, president of Dobson Associates and former Western Showmanager, said every show manager should be on the lookout for industry consolidation taking hold. "I think it is an option that everyone should consider from time to time, not just with a show that is going down or has stagnated," he said.
Besides causing formerly separate companies to combine booths, consolidation changes corporate buying habits, said Francis Friedman, president of tradeshow consulting firm Time & Place Strategies. Conglomerates that have embraced supply-chain management and use key account sales teams have so much clout with vendors that they have less need to meet them at tradeshows.
"These are trends that are underway right now," Friedman said. "All major retailers use that approach. Wal-Mart does not need to go to a tradeshow to buy anything. They still go to tradeshows, but they are exhibiting different behavior."
Friedman said organizers can fight back by focusing more on how the show meets its industry's needs. "The challenge of the tradeshow industry is to create higher levels of value in the tradeshows we are now producing," he said.
But consolidation within the tradeshow industry itself has resulted in professional managers replacing the entrepreneurs that once had intimate knowledge of particular sectors. Rather than just focusing on logistics and space sales, Friedman said organizers must delve even further into their industry's dynamics – understanding its timing and getting to know major players on a first-name basis.
Merger-and-acquisition activity has been in a slump in recent years, after reaching a 1998 peak of more than 7,700 transactions worth $1.2 trillion, according to Mergerstat. But as fresh rounds are forecast for more and more industries, consolidation could become potentially more troublesome. Waves of consolidation are forecast for a number of industries, including plastics, mortgage banking, sporting goods, textiles and pharmaceuticals. "No sector is safe," Friedman said.
For his part, Tully doesn't expect the current consolidated state to last. "The longer I'm in the business, the longer I realize that many things are very cyclical. It almost seems like a fad – buy, buy, buy and grow by acquisition. I can see the pendulum swinging back in the other direction, where they start divesting themselves and try to grow more organically," he said.
