Two companies that consistently make Business in Vancouver’s Top 100 private companies list follow business models that are more like hybrids of private and public ownership models: member-owned co-operatives.
Mountain Equipment Co-op and Vancity Credit Union share one other thing in common, besides their co-operative business model: They’re highly profitable and demonstrated great resilience throughout the recent recession.
Last year, Vancity posted its most profitable year in its 65-year history, with net earnings of $77.4 million. It exceeded its own targets by 44% and returned $23 million in dividends to members and communities.
MEC, meanwhile, had revenue of $261 million in 2010 and paid $2.2 million in dividends to 17,000 of its members.
Vancity ranks 32nd in BIV’s Top 100 private companies list in 2010, with revenue of $424 million (an increase of 11% over 2009). MEC ranked 46th with $261 million (unchanged from 2009).
There are a total of four co-ops and nine credit unions on the Top 100 private companies list.
Vancity CEO Tamara Vrooman credits the co-operative model for the resilience it and other co-ops and credit unions worldwide have demonstrated during the recent global recession.
Unfettered by the need to show short-term returns, co-ops and credit unions tend to take a long-term approach and make “more balanced decisions,” Vrooman said.
“It’s no accident that, if you look around the world, co-operatives have done better through the economic crisis than either privately held or publicly traded companies because they have the requirement to balance those decisions,” said Vrooman.
“We put in place some policies that really assisted our not-for-profit members. We didn’t go the foreclosure route. Instead, we provided extra funds to allow people to work through the economic dislocation, and as a result, we haven’t had to take that many losses.”
Not all co-operatives or credit unions are as successful as MEC and Vancity. Just because they follow a different business model doesn’t mean they don’t have to follow good business practices, said MEC CEO David Labistour.
“The fact that [MEC and Vancity] are on that list of 100 means that both organizations run their businesses well,” he said.
Like many co-ops, MEC was born out of necessity. Now celebrating its 40th anniversary, the co-op was founded in Vancouver by six outdoor enthusiasts who couldn’t get mountaineering equipment locally.
They charged $5 for a membership, which now stands at 3.4 million, and used their collective buying power to buy outdoor recreation gear and clothing at lower prices. Forty years later, MEC memberships are still only $5.
The co-op now has 14 outlets Canada-wide, three of which are in B.C. (Vancouver, North Vancouver and Victoria). Its website is its fastest growing sales channel, however, despite the fact it features a gear swap that allows members to buy second-hand gear and clothing from each other.
MEC is not without its detractors. Co-operatives pay no income tax on profits, which has prompted the charge that MEC has an unfair advantage over its competitors.
On the other hand, co-ops don’t have access to capital markets. Since it can’t borrow money, all of its capital has to come from its members.
“There certainly are our competitors that believe that we have an unfair advantage,” Labistour said. “And to them we always say, ‘Well, if we do so, let us instruct you in how to become a co-op.’ Of course that is a bit disingenuous because none of them want to do it because the reason they’re there is to make money.”
As a business model, co-ops share some resemblance to a publicly traded company in that members, like shareholders, get to vote on the makeup of the board of directors and on how the business is run.
“Your shareholder, your customer and your staff are all the same people really,” Labistour said. “That can be a pro and a con, by the way, but it certainly allows you to focus and you don’t have competing agendas.”
One thing MEC’s members insist on is a commitment to environmental causes. MEC donates 1% of gross sales to environmental causes.
Vancity also has a similar social mandate. Over the past 12 months, the credit union has handed out $940,000 in grants to various non-profit organizations.
$77.4 million: Vancity net revenue
$23 million: Dividends Vancity returned to members
$261 million: Mountain Equipment Co-op revenue
$2.2 million: Dividends paid by MEC
3.4 million: Number of MEC members
1%: percentage of gross sales MEC donates to environmental causes