Open Reply to Kingswood Capital Management

When I first became a member of Mountain Equipment Co-op, I was in first year university (30 years ago). Everyone I knew on campus was a member. I joined because I was going to UVIC and that is what you did (it’s a very outdoorsy school), plus they had good backpacks.

Later, when I became a tree-planter to pay for that university education, MEC was where I bought all my supplies. My tent, sleeping bag, my ‘stingers’. When I rode across the country, MEC was where I picked up most of my bike supplies. Most recently, although I now live in Japan, I went back to MEC to buy a Wahoo Kickr and lug it back here as carry-on.

What felt good about shopping at MEC wasn’t that it was the cheapest (because it isn’t always). It was that I was a member. I was in the club. It was my MEC. It was a co-operative. It was local. It was ethically sourced. It was Canadian.

In my travels over the years I has visited MEC in most provinces. They’re all staffed by knowledgeable people. People who love the outdoors. People who actually cared about what they did, and could tell you all about their sport. And best of all they’re members of the co-op as well!

Let me ask, “How many members of the Kingswood Capital Management camp?” I’m guessing not very many. There is not a lot of camping in the heart of Los Angeles.

Looking at KCM’s portfolio it’s clear that the ideals MEC was founded on don’t mesh with the other assets. The mix of audio/video, project management and auto parts doesn’t shout a cohesive mission statement other than ‘money’. Your priority is in the name of the firm, “Kingswood Capital Management” the priority is capital. The priority for MEC is (or was) also in the name: Co-operative.

What helped make MEC unique was that the board were members, they were people who had worked their way up. They weren’t corporate bigwigs who were brought in with massive salaries with an intent to maximize profits and expand into emerging markets while optimizing shareholder returns.

That changed and now MEC is in trouble. We can blame the internet, or Amazon, or mismanagement, or COVID, whatever. But the truth is, MEC lost it’s way.

While that isn’t your fault, I don’t understand how you write the membership with a straight face, and claim in an open letter that MEC will operate while “remaining true to its values and ideals” when the very nature of it will change? One of the founding principles of a co-op is democratic member control. Where is that democratic control?

Now, (if the sale goes through) it’s priority will be to turn a profit. That wasn’t a priority before. Any profit the co-op made went back into it. It never needed to pay out dividends; the shareholders were the members. Which is also why I find it surprising MEC didn’t reach out to it’s membership. If, at the last annual general meeting the board said they were looking into selling MEC to a U.S. private equity firm, I am pretty sure sure there would have been an uproar.

I have to wonder if the current AGM was delayed for this sale to go through without push-back from members. Delayed until Dec 10, 2020 its kind of moot now, isn’t it. It won’t be the members at the meeting, it’ll be you guys, in Brentwood, California. It also makes me wonder if the alleged election rigging in May, was also just a part of that plan. To ‘stack the deck’ so to speak. I mention this because, the company denied rumours that it was heading into receivership. And yet, here we are a mere five months later; the board handing over the keys without so much as a ‘Hey…‘ to the members.

In the posting on the website for the AGM it notes, “MEC’s members are the bedrock of MEC’s success, and MEC’s accountability to its members is unwavering.” We know that isn’t true though, don’t we? We won’t be members anymore. As you mention in your open letter, we would be “customers”.

You ask the membership “judge us by our actions”. The fact the coop was sold out from under it’s 5 million members speaks volumes.

“We believe that if we work together, we can not only save MEC but make it better than ever while remaining true to its values and ideals.” Why would we “work together?” I’m not a shareholder of Kingswood. I have no interest in the success of your business, and MEC will no longer exist. It’s the “co-op” part that is important, not the mountain equipment.

If there is any justice, MEC will legally have to change it’s name; it will no longer be Mountain Equipment Co-op. Now it’ll just be Mountain Equipment Corporation.