Iconic Vancouver company sold to American private equity firm
The insolvency and sale of MEC (Mountain Equipment Co-op) on Monday didn’t surprise one of the company’s six founders.
“It lost its way five-to-10 years ago,” said Jim Byers, MEC’s first manager. “It changed its brand — walked away from a 40-year brand and changed its branding, changed its pricing policy, changed its inventory policy and p—ed away its profits on buildings.”
But retail analyst David Gray said the co-op also was caught in a rapidly changing retail world.
“The challenges MEC was facing are faced by a lot of legacy retailers and brands,” said Gray, who runs DIG360 Consulting. “Fundamentally it’s about rapid and deep transformation. For most of these organizations, they were just moving too slowly … and then COVID hits.
“COVID didn’t cause any of the problems, what COVID did was it shrunk the timeline dramatically. MEC was having to transform, and that takes time and money and risk.”
The co-op was bought by a Los Angeles private equity firm, Kingswood Capital Management Ltd. Terms of the deal weren’t released, but Kingswood has created a Canadian affiliate to run the firm, led by Canadian retail veteran Eric Claus.
News of the sale was met with dismay by some of the co-op’s five million members. A petition on change.org called on the MEC board to “cancel the deal,” and had gathered 13,654 signatures by 4 p.m. on Tuesday.
According to its 2018-19 annual report, MEC had $462 million in annual sales, but had an operating loss of $23.5 million. The company owned $372 million in assets but owed $183 million in 2018-19.
Mountain Equipment Co-op was founded in 1971 by six members of the Varsity Outdoors Club at the University of B.C.
“All of us belonged to REI (Co-op) in Seattle,” relates Rob Brusse, a co-founder who became the co-op’s treasurer and general manager. “It became a bit problematic to get our gear here. There were a lot of retailers here, but there wasn’t the kind of selection and product availability we had gotten to become familiar with at REI.”
“It was quite obvious there was a market for product in B.C. and, that given the value of the Canadian dollar at the time, and the protective tariffs that were available in Canada, there was margin to be made,” said Byers. “I was a number-cruncher, saw a margin and started collecting money from friends to go to the States, because we could buy a discount in the States, pay all of the duties and taxes on the discounted price, bring it into Canada, and sell it and make a profit.”
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