Mountain Equipment Co-op - Canadian Co-operative Association

Submission To The 

Special Committee 

On Co-operatives 

Presented by 

Shona McGlashan 

Chief Governance Officer 

Margie Parikh 

Vice-Chair, Board of Directors 

Head Office 

149 West 4th Avenue 

Vancouver, BC V5Y 4A6 

mec.ca 

MEC Submission To The Special Committee On Co-operatives 1

Introduction 

Mountain Equipment Co-op (MEC) was founded as a retail 

co-operative in British Columbia in 1971. It remains head-quartered 

in Vancouver, where it is incorporated under, and governed by, the 

British Columbia Cooperative Association Act (1999). 

The business began with six founding members who were active 

in BC’s early outdoor scene, a tiny store in downtown Vancouver, 

and gear focused on climbing. Since then, MEC has grown to 

become a national retailer with more than 3.75 million members, 

fifteen stores in six provinces, www.mec.ca, a 190,000-squarefoot 

Distribution Centre in Surrey, BC, some 1,600 employees, 

and a product offering that continues to grow and evolve in step 

with active outdoor lifestyles in Canada. 

Providing members with clothing and gear for backcountry 

excursions to wilderness destinations shaped MEC’s early product 

offering. Demographic changes within Canada and the trend 

toward ‘front-country’ recreation (close to home for short time 

periods) has led to the evolution of what is now MEC’s extensive 

outdoor product offering. It includes products and services 

that support members’ pursuit and enjoyment of cycling, hiking, 

camping, climbing, running, snowsports and watersports, among 

other activities. 

Stores in Vancouver and Calgary and a relatively small 

membership mainly within Canada’s two western-most provinces 

largely defined MEC’s growth in its first 15 years in business. 

That changed in 1986, when the outdoor retailer opened a store 

in Toronto. Now, Ontario has five MEC stores, Quebec has three 

stores, and over half of the co-op’s total membership resides east 

of the Manitoba-Ontario border. 

Widely recognized for its commitment to sustainability and 

sustainable business practices, MEC supports various outdoor 

recreation and environmental conservation initiatives through 

its community involvement grants program. MEC’s sustainability 

efforts also include formal programs in the areas of ethical 

sourcing, green buildings, and product sustainability. 

Quick Facts 

Sales 

• Lifetime membership is open to anyone by buying a $5 

share in the enterprise. 

• Almost 90% of MEC’s Canadian members reside in one 

of four provinces: BC (16.5%), Alberta (24.2%), Ontario 

(32.8%), and Quebec (16.3%). 

• In 2011, MEC averaged more than 18,750 new members 

per month. 

• In all, more than 13,000 separate products are available 

for purchase at MEC. 

• Approximately 40% of sales stem from private label 

(MEC-brand) products. 

MEC’s gross sales in 2011 totalled $270.1 million, an increase of 3.4% 

(or $8.8 million) from 2010. Ten years previously, in 2001, MEC’s 

sales totalled $153.9 million, or 43% less than where they now 

stand. The growth can largely be attributed to increased sales from 

investments in new stores (9 since 2001, including 3 in Quebec and 

3 in Ontario) and the growing popularity of mec.ca, MEC’s fastestgrowing 

sales channel. 

Pricing 

Benchmark pricing has long been a hallmark of MEC’s retail offering. 

This ‘low everyday price’ strategy means that members enjoy 

access to products that are, on average, 7% below market price. 

The strategy is achieved in part through comparatively low margins 

and low surplus earnings. For example, from 2009 to 2011, MEC’s 

margin averaged 33.4% of sales, while over the same period, MEC’s 

surplus earnings averaged 3.8% of sales. 


Returns and Redemptions 

MEC has two types of shares: subscription shares and patronage 

shares. Individual shares of either kind are valued at $5. Members 

buy a single subscription share to join MEC. At the end of the 

year, after paying suppliers, employees, and operating costs, 

MEC returns any surplus to its members, allocated in the form 

of patronage shares. This member capital is MEC’s main source 

of funding for future growth, given its limited access to other 

sources of funding due to its co-operative structure. 

In the years when MEC’s financial affairs are sound and the 

organization is adequately funded, the co-op buys back 

a number of patronage shares from its members’ share 

accounts. MEC returns the money to members in the form 

of share redemptions. 

MEC has issued share redemptions to its members 12 times 

in its history, to total more than $18 million. The table below 

shows patronage returns and share redemptions from 

2001 to 2011. 

Year Patronage Return Share Redemption 

2001 $1,885,000 $1,200,000 

2002 $2,561,000 no redemption paid 


2004 $13,621,000 $1,020,000 

2005 $11,860,000 $2,062,000 

2006 $19,251,000 $2,086,000 

2007 $15,913,000 $3,565,000 


2009 $12,176,000 $342,000 

2010 $7,891,000 $2,228,000 

2011 $9,000,000 $2,481,000 

Employment 

MEC presently employs more than 1,600 people. Not surprisingly, 

most – almost 80% – work directly in service to members in 

front-line retail jobs, in a mix of full-time, part-time, and casual 

employment positions. Operations, product development, and 

various other business requirements are supported by 278 Head 

Office employees in administrative, professional, and management 

positions. The balance of MEC’s staff handle in-bound freight and 

out-bound order and store fulfillment at the Distribution Centre. 

Guided overall by a strong member service ethic, jobs at MEC are 

as varied as retail is today complex. From financial, inventory and 

logistics analysts to IT experts, web developers, product managers 

as well as HR, marketing, operations and administration personnel, 

jobs at MEC encompass a broad spectrum. Moreover, the unique 

skill sets demanded by private-label (MEC-brand) product design, 

manufacturing, and sourcing give further dimension to MEC’s 

employment picture. 

In 2011, MEC’s payroll totaled more than $52.7 million, or 19.5% 

of total revenue for the year. By comparison, in 2001, compensation 

totaled roughly half as much ($25.5 million). 

MEC policy ensures that front-line retail employees’ compensation 

is above the labour market average for the retail sector. A regional 

pay scale is used to determine compensation. In more affordable 

cities, the pay scale is $11.50–$18.00 per hour; in more expensive 

cities (including Vancouver, Calgary, Toronto) the scale is $12.50– 

$19.00 per hour. As of January 1, 2012, the average wage for MEC 

store employees was $13.74 per hour. 

In 2010 and again in 2012, MEC was formally recognized as one 

of Canada’s Top 100 Employers. The recognition affirms MEC’s 

strategic goal of attracting and retaining top talent by being 

a preferred employer. 


Community Investment 

Through its Community Involvement Program, MEC invests 

in grants and partnerships to support organizations working 

on conservation and access to outdoor recreation, which together 

help support Canada’s outdoor community. In 2011, community 

contributions totaled $2.76 million. Of this, 64% was directed 

at projects or partnerships that support access to outdoor 

recreation or outdoor activities themselves. Since 2001, MEC 

has directed more than $16.6 million to community investments. 

Green Buildings 

MEC builds and operates some of the most energy-efficient retail 

buildings in Canada. The Ottawa store was the first retail store 

in Canada to comply with the (now defunct) C2000 Green 

Building Certification, while MEC Montreal was the first store 

in Quebec to achieve the designation. Likewise, MEC’s Winnipeg, 

Burlington, Longueuil, Barrie, and North Vancouver stores have all 

been purpose-built to high green building standards, while other 

stores in the network have been retrofitted to accomplish similar 

objectives. 

MEC personnel have acquired in-depth knowledge and 

understanding of green buildings – and how green buildings 

can be tailored to support MEC’s brand and its sustainability 

objectives. In that light, MEC stores embody innovation, reducing 

the co-op’s ecological footprint while contributing community 

benefits, positive customer experiences, and healthy workplaces 

at the same time. 

Product Sustainability 

MEC is committed to advancing product sustainability efforts– 

inside and outside the organization. Internally, MEC employs 

a ‘lifecycle’ approach that is geared to choosing lower-impact 

materials and production techniques to build better products for 

members and reduce our ecological footprint. While work on this 

front has only been underway for a few years, it is yielding positive 

results: in 2011, 644 products were made with environmentally 

preferred materials (such as recycled polyester and organic cotton), 

while 39% of textiles came from facilities with environmental 

management systems. Formal targets have been set to increase 

both on an annual basis. 

Industry Collaboration 

Notwithstanding efforts within MEC, a collaborative industry-wide 

effort is needed if product sustainability is to be fully realized. 

That’s why MEC has taken a leadership position in developing 

and advancing the Eco-Index, a decision-making tool created 

by member companies of the Outdoor Industry Association that 

promises to transform product design and development. Technical 

assistance from the US Environmental Protection Agency has 

validated the effort and extended its reach into the wider apparel 

and footwear sectors. 

Proof of such reach is the Sustainable Apparel Coalition (SAC), 

of which MEC is a founding member. The SAC is a collaborative 

effort of retailers, brands, and other organizations that aim 

to reduce the environmental and social impacts of apparel and 

footwear products sold around the world. Collectively, members 

of the SAC represent over one-third of global retail purchasing power. 


Capitalization 

MEC makes investment decisions based on its financial outlook 

at a given point in time. Federal tax law enables MEC’s growth and 

its short- and long-term financial health by facilitating its ability 

to retain members’ capital to fund day-to-day working capital and 

store and product investments for members. 

The Canada Revenue Agency summarizes the applicable provisions 

(Section 135, Patronage Dividends) of the Income Tax Act as follows: 

“In computing income for a taxation year, a taxpayer is allowed 

to deduct patronage dividend payments made to customers. 

While the taxpayer involved is usually a cooperative corporation, 

sole proprietors, partnerships and ordinary corporations may also 

qualify for the deduction.” (Source: CRA Income tax Interpretation 

Bulletin IT-362R) 

In turn, this provision of the Income Tax Act corresponds to Section 5 

of MEC’s Rules of Co-operation, Allocation of Surplus, which reads 

in part: 

5.02 Subject to Rule 5.01, the Co-operative may apportion 

surpluses from its business to any or all of the following: 

a) declaring patronage returns, and distributing them 

to the members as set out in Rule 5.03, 

b) declaring dividends and paying them to the members 

at a rate not to exceed 8% yearly, 

c) retaining all or part of the residue for the purposes of the 

Co-operative, 

d) donating all or part of the residue for charitable 

or educational purposes. 

Member Equity 

Members’ total equity in the co-op represents the slow and steady 

accumulation of subscription shares and patronage shares – minus 

redemptions paid – over the course of 40 years in business. 

Pooling members’ shares for mutual benefit helps MEC maintain 

solid financial health. In other words, members’ equity is retained 

in MEC to finance our operations and improve our ability to serve 

members by investing in inventory, new stores, and infrastructure. 

The amount of patronage shares each individual member 

accumulates is small, but is significant when it is pooled with 

those of all other members. Indeed, at the end of 2011, members’ 

combined equity in MEC totaled $160 million, an increase 

of $7.6 million from 2010. 

Recommendation 

Owing in part to its incorporation in BC, MEC has few direct 

dealings with the federal government. However, to the extent 

that MEC is both a retailer and a manufacturer, it is best aligned 

with the mandate and purview of Industry Canada. For this 

reason, MEC supports the Canadian Co-operative Association’s 

recommendation to see Industry Canada as the federal ministry 

that would be responsible for the co-operative sector. 

Beyond that, MEC encourages the Special Committee 

to recognize co-operatives as an important sector of the 

economy deserving of a policy and legislative framework that 

enables them to grow and thrive. 

Generally speaking, MEC has employed provisions a, b, and c above 

to build members’ equity through patronage returns, and 

to underwrite capital investments. 

It is important to emphasize that MEC’s capital structure is ‘lowgeared’ 

– that is, total borrowings are low relative to total equity 

(see below). This conservative approach is a function of MEC’s lower 

surplus targets as well as MEC’s limited access to funding, which 

is generally confined to bank borrowing rather than alternatives 

available to other private or publicly traded companies. 

From 2001 to 2011, MEC’s capital investments (mainly store 

developments and infrastructure) totalled $132.5 million.

Mountain Equipment Co-op - Canadian Co-operative Association

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