The North West Company, Inc. Business Information, Profile, and History

History of The North West Company, Inc.

The North West Company, Inc., is the leading seller of food and other general merchandise in small towns across the northern territories of Canada and Alaska. The company runs general stores in more than 100 locations, providing local populations with a wide variety of services. Boasting an illustrious history that began in the colonial era, the North West Company was split off from a larger retailer in the late 1980s.

The North West Company is part of a long tradition closely linked to the development of the North American continent. The company traces its roots to a trading post at Fort Charles, which was built on the southeast corner of James Bay by Sieur des Groseillier in 1668. Two years later, on May 2, 1670, King Charles II of England granted a royal charter to the Governor and Company of Adventurers of England Trading into Hudson's Bay. This group became the legendary Hudson's Bay Company, with rights to conduct trade over a vast swath of the North American continent. The Hudson's Bay Company, which maintained its headquarters in London, concentrated its efforts on the enormously lucrative fur trade. Its merchant adventurers set out for the new world in a ship called the Nonsuch in the wake of their receipt of the king's charter.

The Hudson's Bay Company got its first real competition in 1779, when Simon McTavish and 15 other men formed a partnership which they called the North West Company. This company was created to trade furs, and its base of operations was established in the new world, in Montreal. In addition to its rivalry with the Hudson's Bay Company, North West faced stiff competition from American fur traders.

In 1783, the North West Company was formerly incorporated. Ten years later, an exploratory expedition sponsored by the company and led by Alexander Mackenzie reached the Pacific by an overland route on July 22, 1793, near the present-day town of Bella Bella. In this and other expeditions across Canada, traders for the North West Company established a reputation as daring risk-takers who often beat their rivals in the Hudson's Bay Company to new locations and engaged them in bloody feuds and running gun battles to protect their turf.

In the late eighteenth century and early nineteenth century, at the height of the rivalry between the two companies, the North West Company established a major trading hub on the western shore of Lake Superior, deep in Indian territory. In addition, the company owned hundreds of fur trading posts, where pelts were bought, sold, and distributed. These were located throughout British colonial North America and the far northern reaches of Rupert's Land. Moreover the company had facilities in London to distribute furs to the European market.

In 1795, the fur trade entered a boom period, and the North West Company pushed its activities further west, building fortified trading posts along the North Saskatchewan River, and making Edmonton a new hub of activities. Intense competitive trading with the Hudson's Bay Company and American fur sellers continued into the early nineteenth century. In 1813, for instance, the North West Company captured Astoria, a fur trading post owned by the American John Jacob Astor, for which he was reimbursed $44,000.

Despite these aggressive and enterprising activities, by the early 1820s the North West Company was in shaky financial shape, its fortunes damaged by an overall decline in the fur trade. In 1821, in a deal brokered in London, the North West Company was absorbed by its longtime rival, the Hudson's Bay Company. Many of the North West Company's partners were not fully informed of the nature of their company's merger until months after the arrangements had been completed. "This is not amalgamation, this is submersion!," one of them was reported in Maclean's to have protested. "We are drowned men." In the wake of this merger, which caused the activities of the North West Company to be conducted under the banner of the Hudson's Bay Company, the combined enterprise began to regain some of its former primacy in its old trading domains. The combined companies controlled a fur-trading monopoly that covered one-quarter of North America.

Throughout the rest of the nineteenth century, and into the twentieth, the activities of the North West Company continued under the guise of the Northern Department, which later became the Northern Stores Division, of the Hudson's Bay Company. This arm of the firm ran retail outlets in small communities located in Canada's northern territories. Over time, the Northern's corporate parent evolved into a Canadian department store chain.

In 1979, the Hudson's Bay Company was sold to Thomson International, a newspaper publishing conglomerate. Eight years later, on May 2, 1987, the Hudson's Bay Company sold its Northern Stores Division to a group of investors, which included 415 of the division's employees. This move came after the price of the stock of the Hudson's Bay Company dropped dramatically, and the company found itself awash in C$2.5 billion of debt.

The transfer of ownership of the Northern Stores division took place in a ceremony that paid homage to the company's historical significance for Canada. At the Manitoba Museum of Man and Nature in Winnipeg, aboard a replica of the Nonsuch, 317 years after the Hudson's Bay Company was chartered, the governor's flag was lowered and presented to the leader of Manitoba, who also received one symbolic share in the company. These gestures were designed to placate the residents of the 178 northern communities served by the Northern Stores division, who had been wholly dependent on the Hudson's Bay Company for many years, and were disturbed by turmoil within the company. For small, isolated towns, the Northern stores were not only a sole source of groceries, but their managers often acted as unofficial legal, financial, social, and sometimes even spiritual and medical advisors to the residents of the communities.

Investors in the holding company, called the North West Company, Inc., paid $215 million for the Northern Division. Among the chief investors were the Mutual Trust Company of Toronto, the Mutual Life Assurance Company of Canada, the Toronto Dominion Bank Capital Group, the Royal Trust Corporation of Canada, the Teacher's Retirement Allowance Fund Board, along with the Hudson's Bay Company.

The new enterprise, temporarily renamed "Hudson's Bay Northern Stores," included 178 retail outlets, two airplanes, and a 3,000-ton freighter, named the Kanguk, which was used to supply Northern stores in Labrador and on the eastern Arctic shore. In addition, the Northern had 3,845 employees, making it the second largest employer in the northern territories after the Canadian government. In keeping with its history, it continued to buy furs at 50 different locations.

All of the senior executives of the Northern Stores stayed with the company, and purchased stock in the new enterprise. On July 17, 1987, the company shortened its name to Northern Stores, Inc., dropping the reference to the Hudson's Bay Company altogether, as stipulated in the sale agreement. The first order of business for the new managers of the Northern Stores was to reduce the company's level of debt, which had originally been taken on to finance the buy-out from Hudson's Bay. Within two years, the company's finances had been greatly strengthened. In 1988, the Northern Stores reported sales of C$436 million, followed in 1989 by sales of C$441 million.

These strong returns were derived from the company's Northern Stores outlets, despite the presence of competition in several key markets. In the City of Thompson, in northern Manitoba, for instance, co-ops, independent stores, and a Woolworth's competed for the dollars of the company's clientele, which was largely made up of Natives. Because of the presence of satellite televisions, demand among this remote population for up-to-date goods remained steady. To meet this demand, the Northern Stores offered goods as diverse as bananas, kiwi fruit, videos, outerwear, furniture, household appliances, satellite dishes, hockey equipment, hunting equipment, and all-terrain vehicles.

In marketing all of these goods, the Northern Stores faced the challenge of transporting them to remote locations. Transporting a 10-kilogram bag of potatoes to some of the company's stores cost as much as the bag of potatoes itself. In order to guarantee service to its customers, the Northern Stores ran its own transportation system, with multi-use cargo vessels that could cut ice, transport barges, and unload goods at ports where there were no docking facilities. Every year, the company sent tons of goods up the St. Lawrence Seaway to remote warehouses for distribution in the arctic. Trucks traveled winter roads between warehouses and stores.

Because of the transportation factor, the job of managing the company's stock and picking suppliers who offered the proper merchandise at a competitive price became even more important. "We have to be told what is selling well, such as Ninja Turtles, or fashion colors," the company's president told Manitoba Business in 1990. "That's the job of our suppliers and buyers." In addition, the Northern Stores moved to computerize its control of inventory, to cut interest costs on unsold goods.

In addition to the activities of its Northern Stores, the company ran several other related lines of business. The Inuit Art Marketing Service was the largest marketer of Inuit stone carvings in North America. The Fur Marketing Division and Hudson's Bay Blanket Division harked back to the company's past. Transport Nanuk, Inc., an off-shoot of the Northern Stores' own shipping activities, offered a leading means of transporting goods in the eastern Arctic.

In order to solidify the company's identity as an independent retailer, the Northern Stores company changed its name one final time on March 16, 1990. At that time, it became The North West Company, and its retail operations took the trading name Northern. In order to assume this identity, the company had to gain control of the name from another company, Imperial Oil Limited, which owned the rights to it for one of its exploration subsidiaries. However, this company relinquished rights to the historic label, and the North West Company, long ago subsumed into its rival, took on new life.

With profits again steady, the Northern Stores started to contemplate expansion through the acquisition of other companies. In order to raise capital for such a move, the company made plans to offer stock to the public in the near future, at a time when financial markets were strong. But in the fall of 1990, despite a slow summer, the North West Company went ahead with its planned stock offering, selling shares to the public on the Winnipeg and Toronto Stock Exchanges. With this capital, the company set out to acquire complementary retail operations.

In the early 1990s, the North West Company began a process of shaping its long-range planning and operations. In 1991, the company completed "Enterprise '95," a strategic plan governing the next four years, which focused the company's activities on retailing food, family apparel, and general merchandise in small, northern communities. As part of this plan, the North West Company moved to modernize its stores, and streamline its distribution network. In addition, the company instituted a training program for Native Canadians, to promote their hiring within its stores. The company's 79 percent Native employment rate remained second only to that of the Canadian government.

In addition, the North West Company took steps to consolidate its operations in Winnipeg. In 1992, the company centralized its national warehousing in Winnipeg, purchasing a $12.2 million 350,000-square-foot modern Retail Service Center facility. After extensive technological improvements, this distribution center opened in April of 1993. In addition, the company closed its Montreal buying office and moved it to Winnipeg. With these moves, the company left the city of the historic North West Company, choosing instead a location much closer to its current operations. By 1993, the North West Company's sales had reached C$452.1 million, making it the twelfth largest earner in Manitoba.

On November 20, 1992, the North West Company completed a year-long process of negotiation, and purchased the Alaska Commercial Company for $6.5 million. This company, which was the state's oldest enterprise, dated its founding to 1776, when the Russia-America Trading Company was established. As part of this deal, the North West Company also acquired Frontier Expeditors, Inc., a wholesale grocery firm. With this purchase, the company added ACC's chain of 20 rural stores in Alaska, which held 15 percent of the market, to its own Canadian holdings, which boasted half of the retail market in remote northern territories.

Together, the North West Company's two new properties had $75 million in annual sales. As it had already partially done in its Canadian operations, the company moved to introduce the techniques of modern retailing--from bar-code scanners to in-store pizza restaurants&mdashø its new Alaskan outlets, which had long been starved for capital. The North West Company pledged to infuse $30 million in cash into improvements and to add 15 to 25 new stores over a five year period.

In addition to its retail operations in Canada and Alaska, the North West Company also developed a catalogue to stimulate mail order sales. Called Selections, this brochure featured items stored and shipped from the company's Winnipeg warehouse. In a further geographical expansion, the North West Company arranged for this catalogue to be translated into the language of Greenland, and distributed there by KNI Retail A/S, the island's largest retail chain.

In August of 1994, the North West Company further expanded the scope of its activities when it bought six stores located on Kodiak Island from O. Kraft & Sons, a company based in Lake Oswego, Oregon. These stores, which generated $15 million in annual sales, consisted of two grocery stores, two liquor stores, a convenience store, and a combination liquor and grocery store. The company planned to add these units to its AC Value Center line, the name it used for the stores it had acquired from ACC. In addition, the North West Company planned to spend $1 million renovating one of the grocery stores, called the City Market, to add 10,000 square feet of selling space. By the end of 1994, the North West Company's combined operations had yielded C$548.7 million in sales. With an illustrious history stretching back centuries, and a solid record in retailing in northern territories, it seemed certain that the North West Company would continue to thrive in the coming years of the 1990s and beyond.

Principal Subsidiaries: Alaska Commercial Company; Transport Igloolik.