The unknown financial cost of canceling in-person NPE2021

While the pandemic-driven decision to cancel this year's NPE2021 plastics show is getting wide support in the industry, it could also have some sizable financial downsides.

Organizers said they had no choice in their Jan. 5 decision but to cancel the triennial show, given the spread of the coronavirus. But some said its absence could be an economic drag in an already difficult year.

The show, with more than 50,000 registered attendees and 2,100 exhibiting firms spread over 1.2 million square feet of the Orange County Convention Center in Orlando, Fla., is the biggest in-person buying marketplace and new technology showcase for plastics in North America.

As well, the show, which had been scheduled for May 17-21, generates about half of the budget of the Plastics Industry Association, creating a potential financial hole with longer-term implications for one of the industry's largest lobbying and advocacy groups.

In recent weeks, the plastics association had come under increasing pressure from exhibiting companies to cancel the show, as they grew more concerned about exposing staff and visitors to the virus and worried a smaller event would make it hard to justify the cost of exhibiting.

Tad McGwire, chair of the NPE executive committee within the plastics association, said safety and health of attendees was the top priority for organizers.

The U.S. hit a daily record high of 4,085 COVID-19 deaths on Jan. 7, surpassing the previous high set just the day before, according to a tracker operated by Johns Hopkins University.

"We held out hope up until the week before Thanksgiving that things are going to move along fast enough in terms of controlling the spread and the distribution of vaccines," McGwire said. "But it was really the first two to three weeks in December that demonstrated that there was no way we could safely hold this show."

The scheduling and logistics problem for organizers is that it is extremely difficult to find another window for the event, given its size and demands machinery companies bring to the show floor, sometimes shipping it in from overseas.

The fair only runs five days but requires a 28- to 30-day window for setup and takedown, McGwire said.

In the U.S., only the Orange County Convention Center in Orlando and Chicago's McCormick Place have both the size and electric power capacity to handle NPE, he said. While Las Vegas is big enough, it would need a power grid upgrade to handle all the industrial equipment running during the exhibition.

"The bottom line is that there were no dates available at any appropriate venue that would allow us to postpone the show to a later date," said Wylie Royce, immediate past chair of the association's board. "The amount of time and effort needed to set up, produce and break down a trade show of this size is enormous."

That left show officials largely looking ahead to the next edition in 2024, even though it would mark six years without an NPE in the United States.

Show executives said they're still working out details for a virtual alternative to the 2021 event and issues like procedures for handling fees already paid.

Without the show this year, McGwire and some others are pointing to a negative impact on the industry as a whole.

Bill Wood, founder of Mountaintop Economics and Research Inc. and the economics editor for Plastics News, said historical data shows a sizable bump in plastics machinery sales during NPE years, as executives come to the event ready to buy and suppliers roll out new technology.

For example, Wood estimates that in 2012, 2015 and 2018, the value of primary plastics machinery shipments increased 25 percent, 5 percent and 10 percent, respectively, over the previous year.

Auxiliary equipment makers saw similar jumps of 15 percent and 13 percent in 2012 and 2015, respectively. Wood said he could not determine a figure for 2018 because of data limitations.

"The impacts of the NPE years are obvious and substantial," Wood said. "There is a clear, three-year pattern in the data. The show generates a huge amount of marketing activity, and it … also provides a giant and widely anticipated nexus for buyers and sellers."

He said the pandemic makes it hard to predict this year, although he believes the fair would have boosted industry investment.

"The total number of plastics machinery deals this year will be lower than they would be if the show was live, of that I have no doubts," Wood said. "I am not sure just how much canceling the show will affect business overall because the direction and growth rate of the entire economy is still vexingly dependent on the trends in the virus statistics."

McGwire also believes not having the show will hurt the economic picture for the industry.

"I do see it as a negative impact on the industry, particularly now, as the plastics industry was really an integral part of helping this country come out of the pandemic by providing PPE equipment and other products," he said.

McGwire added that the industry will also be missing a chance to try to counteract the negative public attention that plastics get, including by showing the industry to politicians and others it invites to the fair.

"I think it's a real shining spot for our industry to be able to promote, with all the negativity that's in the press now about plastic, to be able to put on a positive event like NPE … is good for industry," he said.

Royce, however, believes it's too soon to say what impact the cancellation could have on investment in the industry, which industry statistics say directly employs 1 million people in the United States.

"Thankfully, our industry has proven to be resilient during COVID and continues to expand," he said.

The loss of the show this cycle will also put a hole in the budget for the Washington-based plastics association, which is one of the industry's two largest trade associations and is a prominent advocate for plastics in public debates about single-use plastics bans and environmental concerns.

Leaders of the group say they've built up reserve funds over the last decade, since financial problems with NPE2009 during the Great Recession forced sizable staff cutbacks in the organization.

NPE generates about half of the group's roughly $20 million annual budget, with the proceeds from the show banked over a three-year cycle between events.

"It's no secret that NPE is a revenue generator for [the association]," Royce said. He believes the group will continue to be able to advocate for the industry, "which we see as an increasingly important responsibility in Washington and around the country."

McGwire, who is also the vice chair of the association's board, said the reserve funds built up since 2009 should be able to carry the group into much of 2022, but they will have to make decisions.

"After 2009, we tried to be much more fiscally proactive about setting aside funds, that if we had an economic slide, that we would still be able to move forward," McGwire said. "Is that fund big enough to carry us for three years until the next show? At the moment it's not, so we have some planning to do and the decisions to make."

He said the group has ample reserves to carry it for the time being.

"We have enough, certainly enough cash to continue to function in the way we have been functioning well into 2022," he said, without doing anything like a special assessment. Deposits for the 2024 show would start to come in at the end of 2022.

Association leaders did not provide details on procedures for handling funds already paid to the organization for the 2021 show.

"Our member-led NPE committee is working to find a solution that recognizes the strong long-term relationship between the association and our exhibitors," Royce said. "We look forward to reporting back to exhibitors with a workable solution."

NPE organizers are also working on details for an online show this year.

"We're reviewing our options for a virtual show and will know more very soon," Royce said.

McGwire said exhibitor opinions are mixed about having an online-only show, instead of a virtual component that would have added to the in-person show, as previously planned.

"We have exhibitors that are very excited about the virtual component and some that really aren't interested at all," he said. "So we have to balance that out with the cost. It's a completely different program."

Tony Radoszewski, president and CEO of the plastics association, said it was a tough decision to cancel, but he noted rising concerns among exhibitors. He said the association's board voted unanimously.

"Talking with exhibitors throughout the year, we began to hear a more heightened concern as the new year approached that a live show would be impossible without major risks to the health and welfare of their employees, their customers and show attendees," he said. "Nearly all expressed a desire to have the show go on, but the uncertainty of effects from the COVID-19 virus was significantly weighing on them."

Companies welcomed the decision, and some noted strong pressure from exhibitors as a driver.

"This decision was overdue and based on the pressure of the industry and not the concerns of the organizer," Jens Schlueter, president of W. Müller USA Inc., wrote on social media. The Agawam, Mass.-based company is a unit of German blow molding extrusion equipment maker W. Müller GmbH.

As well, a Dec. 17 letter to NPE organizers from auxiliary equipment maker Novatec Inc. had urged them to cancel.

Novatec CEO Conrad Bessemer wrote that "although we have been told for some time by members of the NPE committee that everything will be fine," he said an in-person show could not be held safely.

Novatec had shared its letter with Plastics News Dec. 17, becoming the most prominent firm to publicly push for cancellation.

Radoszewski said the association is beefing up its digital operations and is evaluating alternatives to events it had planned to co-locate at NPE2021, including its Re|focus sustainability conference and the Plastics Hall of Fame award ceremonies.

He said the group's most important task ahead may be advocating for the role of plastics in the economic recovery and public health response to the coronavirus.

"Plastics are crucial to the COVID-19 response, as well as economic recovery, and our association is making sure policymakers at all levels of government know that, which could be our most important job right now," he said.