Natural Products Expo West is the premier confab of the Natural, Organic, and Healthy products industry, now packing in 80,000 attendees. But it started with a ragtag group of hippies looking to change the world and smoke some weed. We trace the sex and drug-filled roots of a counter culture movement that’s gone full corporate and wonder: Is Bigger Better?
IN 1981, Doug Greene, a natural foods re – tailer and publisher of the fledging The Natural Foods Merchandiser, organized a gathering for his comrades—people who grew, sold and manufactured organic foods and supplements. His mission: Create a new, healthier food system free of the preservatives and pesticides they believed tainted the conventional food business. “We were all part of the counter-culture, hippie movement,” recalls Theresa Marquez, who attended that first meet up and is now the Chief Marketing Executive at Organic Valley Family of Farms. “We were interested in alternative foods, drugs, getting back to the land and getting back to the basics.”
Word traveled fast and 3,000 people showed up that year, including those who packed their cars with their wares—grains, organic dairy, herbs, spices, supplements, tofu and more. They arrived at the convention center in Anaheim, California and inaugu – rated the first-ever Natural Products Expo West. Some pitched tents in the parking lot; others crammed into motel rooms with their peers. The close coed quarters led to shenanigans that gave the gathering the “Sexpo” nickname. Those early days have become the stuff of Expo West lore and industry insiders have stories about a handful of the attendees, who later built some of the most successful brands in the business, who supple – mented their income in the nascent industry by selling pot.
“It was a tribal gathering,” recalls Gary Hirshberg, the co-founder and chairman of Stonyfield yogurt. “It was part trade show, part celebration. Th ere weren’t a whole lot of customers in those days, no major retailers, just a lot of small hippie natural foods stores. Back then, we would have never used the word industry, at least not with a straight face. We were farmers, we were activists, and it was fun. It was a lot of fun.”
Doug Greene has since sold his media company but Expo West still perseveres as the premier convention for the natural and organics business. As the industry has exploded so has the show. Last year 80,000 people descended on Anaheim, as did more than 3,000 businesses who set up booths to strut their stuff and garner attention from consumers, buyers and media. And last July when Amazon announced their intention to buy Whole Foods for over $13 billion dollars (the transaction is pending Federal Trade Commission approval), it became even clearer that this once outsider industry has gone mainstream.
This has some industry observers wondering if a tipping point has been reached, where corporate acquisition and Wall Street money might compromise the integrity of companies. Th ey were, after all, founded on the counter-culture notion that our food systems are broken, that chemicals, sugar and preservatives make us sick, and that it’s time to take care of the environment by paying attention to how we eat, farm, and consume.
IN 2016, THE $141 BILLION NATURAL PRODUCTS INDUSTRY HAD A 7.4% RATE OF GROWTH.
“The tribe is still a tribe but it’s morphed into a tribe of entrepreneurs rather than activists,” observes Hirshberg, who was at the helm of Stonyfield in 2014 when it was purchased by French-owned Danone. It’s that push and pull between activist entrepreneurs and big business that has allowed Expo West to explode into the behemoth it is today.
$700 MILLION!! THE STAGGERING SALE PRICE OF PACIFIC FOODS TO CAMPBELL’S SOUP COMPANY
“The challenge of the movement right now is how do you stay true to the core principles and what does that mean?” says Robyn O’Brien, a former food industry financial analyst who became a natural foods consultant and founded AllergyKids after one of her four children came down with severe allergies. “The first generation of entrepreneurs who started companies like Whole Foods, Stonyfield, White Wave, and Organic Valley were pioneers and they came at it with fight and ingenuity. Now, we’re in the tugof-war stage and the second generation has to figure how to work with the multinationals and make them part of the team while maintaining the standards of transparency that are crucial to building customer loyalty.”
When I look at the merger mania and the retail apocalypse, it makes my head spin. And I wonder do we really want our food coming from a handful of corporations? It doesn’t occur to me that’s a good idea.” —Th eresa Marquez, Organic Valley
From a pure numbers perspective it’s clear why corporations like Campbell’s Soup, The Coca-Cola Company and General Mills vie to get into the natural category. Conventional food market sales are flat with an annual growth rate of less than one percent, whereas the natural and organic market continues to soar. In fact, according to Natural Foods Merchandiser data, in 2016 the $141 billion natural products industry had a 7.4 percent rate of growth. Over $54 billion of those sales came from natural foods stores—a long way from the $1.9 billion in 1980.
A handful of recent acquisitions demonstrates the competition and the corporate interest. In 2014, General Mills bought Annie’s at a premium for $820 million. After an initial 40 percent investment in Honest Tea in 2008, Coca-Cola bought the company in 2011. Justin Gold sold a minority stake of Justin’s Peanut Butter in 2013 to the private equity firm, VMG Partners, and in 2016 Hormel Foods—the makers of Skippy and Spam—bought the company. Last July, Pacific Foods—one of the original independently owned Expo West pioneers—sold out to the Campbell’s Soup Company for a cool $700 million.
From a business perspective these deals make perfect sense. Independent company launches, develops loyal customer base, expands as much as it can without outside investment, and then plateaus needing more resources to reach more consumers. That’s why Expo West has become a trolling ground for Wall Street types looking for the next big thing—a reminder that long gone are the days of Birkenstock’s and blue jeans. That enhanced, bikini-clad woman standing on the convention floor in the whey-protein powder booth is here to say.
But this business boom is also a boon for consumers who crave healthy, safe, and organic choices. And since that first show in 1981, the quality and quantity available at Expo West has come a long way in opening up market share for people like Nicole Dawes, who founded Late July Snacks when she got pregnant and couldn’t find good-tasting organic saltine crackers. Dawes certainly had an advantage— her father founded Cape Cod Potato Chips and her mother owned a natural foods store—but she still recoils in distaste at the memories of the 1970s health food she grew up eating. “We were macrobiotic and our food tasted awful,” she says. “I love my mom, she taught me a lot about food choice, but it would not be inaccurate to say that the snack foods tasted like the box it was packed in. And then there was the seitan, tempeh, carob and toasted rice cakes. To this day, I still can’t eat adzuki beans.”
Even though Dawes’ company is successful—she told Fortune magazine she’s hoping for over $85 million in sales for 2017—Late July can’t compete with the promotional and advertising budgets of conventional, snack brands like FritoLay. So, she also wonders: if she entered the industry today, would she have the same success? “It’s grown so much that it’s harder for a small brand than it was for me in 2003,” she says. “That makes me a little sad. Today, it’s much harder for a company to get noticed at Expo West. They’re entering the business on a wing and a prayer and my heart breaks a little when I see them because I know how tough it’s going to be.”
Yet, industry experts like Carlotta Mast, Executive Director of Content & Insights at New Hope Natural Media, which puts on Expo West, point to a recent Nielsen analysis that found that grocers now dedicate nearly 88 percent of shelf space to small- and medium-size brands such as the ones that exhibit at Expo West. “That feels like a positive change for the food industry in general and for naturals in particular,” Mast says. “We’re seeing innovation-focused products from mission-based companies that stand for something and have sustainable practices. They’re addressing a problem in the food system, like climate change for example, so it’s more than just a product, it’s also part of a solution.” Think dairy alternatives, nut-based milks, and plant-based meat alterna – tives—all products that aren’t de – signed just for vegans or vegetarians.
That kind of morale boosting is also a mission at Expo West, where educational panels, sampling, and net – working feature the best and brightest in the industry. At Naturally, we call it our fashion week because not only does it determine what our readers will find on their shelves in coming seasons, it’s the place where we spot trends as well—coconut jerky, anyone? Or what about the proliferation of ingestible collagen products, à la Vital Proteins’ grass-fed, pasture-raised, beauty powder favored by Jennifer An – iston? We eat a lot of samples—there’s an ooey-gooey reason the lines are five deep to get a taste of Daiya’s new plant-based cheddar style sauce. And yes, we may dare to try Chacol’s dark chocolate, cayenne, and coffee cricketprotein powered bar (yes, bugs), as seen on Shark Tank.
But all that cheerleading (and sampling) comes with a dose of skepticism even from evangelists like O’Brien, who points out that not every entrepreneur or investor has the kind of passion, commitment, or integrity that aligns with Expo West’s founding values. “It’s easy to see who’s there to make a quick buck,” she says, “It wasn’t like that five years ago. When I walk the convention floor with investors, I’m more interested in companies that are solving a problem, even if it’s in a seemingly mundane category like hummus, because do we really need organic cotton candy or another gluten-free cookie?”
True believers like Organic Valley’s Marquez—who’s committed to her employee-owned company, one that operates without venture capital and puts a priority on keeping family-run organic farms in business—wonder if the values that built Expo West are slipping away. “I fear we’ve just become another huge industry,” she says. “When I look at the merger mania and the retail apocalypse [referring to the pending Amazon acquisition of Whole Foods], it makes my head spin. And I wonder, do we really want our food coming from a handful of corporations? It doesn’t occur to me that’s a good idea.”
