AC parent company buys local competitor

DUSTIN SOLBERG

April 04, 2008 at 8:38AM AKST

The parent company of the Alaska Commercial Co. quietly bought a pair of Bush competitors for more than $6 million in a March 3 deal.

The purchase by the Canada-based Northwest Co. brings the two grocery operations of Span Alaska Enterprises into its growing web of international vendors.

The Monroe, Wash.-based Span Alaska Enterprises, with about $19.5 million in total annual sales, was owned by Dan and Denise Howard and began business in 1972.

Its mail-order retail division ships bulk household staples to rural Alaska households from its Washington state warehouse. A wholesale division that serves village stores will continue to do business as Alaska Rural Enterprises, according to its general manager, Jim Walker.

"All the key people have remained in place. Nothing has changed. The level of service that customers of Span Alaska and Alaska Rural Enterprises have always experienced will continue on," Walker said.

He said the purchase would allow for "stronger purchasing power" that could benefit rural Alaska consumers. The additions join the 29 AC Value Center retail stores in rural Alaska and the Frontier Expeditors – a wholesaler that has competed directly with Alaska Rural Enterprises.

Some customers aren’t so sure that prices will drop.

"We’ve been a longtime customer with ARE . We just recently purchased our products and we have seen some (price) increases in our groceries," said Jackie Larson, who manages the Napaskiak Inc. village store. He said the increases are as high as 8 percent.

Though some smaller price increases have appeared in recent months due to rising transportation costs, Larson said he believes the March price hikes in staples such as flour, sugar, coffee and pilot bread are the result of the sale. For now, Larson said he’s a more careful comparison shopper.

In addition to the Northwest Co.’s Frontier Expeditors and Alaska Rural Enterprises, Carr-Gottstein’s Arctic Supply, Super Value and Unified Western Grocers remain among the grocery wholesalers serving rural Alaska.

For the Napaskiak store, these price hikes come on top of stiff competition from larger Bethel retailers. The Kuskokwim River village of Napaskiak, pop. 464, lies just seven river miles from the Southwest Alaska hub with a population of nearly 6,000.

"We’re facing some challenges. Especially being close to Bethel, sometimes we’re losing customers. It’s a big challenge to compete with Bethel prices," Larson said.

As the owner of several grocery stores in rural Alaska, Omni Enterprises Inc. competes directly with AC stores. Company president Ken Walker said it has bought wholesale from ARE "from time to time." But he said the company will rethink this "because of the new ownership."

Walker said the purchase wouldn’t necessarily limit competition. "There’s probably still three large wholesalers that sell to Alaska," he said.

Representatives from Alaska Commercial and the Winnipeg, Manitoba-based Northwest Co. did not return calls for comment. A separate company, Span Alaska Consolidators, is not involved in the sale.

SIDEBAR

AC parent company financials

The Northwest Co. reported that retail food prices at its Alaska Commercial stores are expected to rise "4 percent or higher" in the first quarter of 2008. It acknowledged that prices at its North Mart and Giant Tiger stores operating in southern Canada will increase "at a lower rate" due to local competition.

"Big-ticket general merchandise sales" such as ATVs and plasma screen televisions lead the company’s growth, according to Northwest Co.’s March 19 quarterly report.

"Merchandise programs at AC’s retail stores successfully attracted more discretionary spending tied to higher Permanent Fund Dividend payments compared to 2006. Similar to Canadian general merchandise sales, the strongest categories were transportation, electronics and home furnishings.

Food sales at AC stores in Alaska increased 5.5 percent. General merchandise sales were up 14.6 percent.

In 2007, the Northwest Co. purchased the 12 stores of the Cost-U-Less club-style warehouse foods chain, which operates in U.S. territories, Hawaii and other island nations.

Overall, the Northwest Co. reported earnings of $18.9 million for the final quarter of 2007, an increase of 15.7 percent over last year.