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Koncor Forest Products: timber for the 21st century.

Skillful marketing strategies and an eagle eye on the environment make this Native village corporation-owned company a leader in Alaska's timber development.

Profits for rural residents in all corners of Alaska. Diversification of the state's economy. Harvesting precious forest resources without damaging the environment. You catch word of companies that provide at least one of these prized features, but how often can you find a company that provides all three?

Take a look at Koncor Forest Products Co. Formed by four Native corporations, the Anchorage-based company owns or controls in excess of 2 billion feet of Alaska timber. Marketing that wood to clients worldwide earns the company millions of dollars a year: gross revenues of almost $51 million for fiscal year 1992 and anticipated revenues of nearly $80 million for 1993. That's all with a staff of 16 people.

"We put a lot of effort in doing this right," says John Sturgeon, Koncor's president. "We just think it's good business."

According to Sturgeon, the company's success comes from elements like cooperation, broad-based marketing expertise and focused attention to the environment. Each of these elements is tightly woven into Koncor's structure -- a structure that began in 1977.

Cooperative Startup

North of Kodiak Island lies Afognak Island, for generations a land of riches for its Native peoples. Here run sparkling streams full of fat, healthy fish. Here stand thick forests, teeming with bear, elk and deer. On this island, Koncor Forest Products Co. got its start.

Back in the 1970s, under terms of the Alaska Native Claims Settlement Act, many Native corporations received title to land on Afognak.

"Once we got title to the land and saw the lack of opportunity for younger people," says Andy Anderson, president of Ouzinkie Native Corp., "we saw the need to diversify so we could provide employment and bring profits."

Diversifying the fishing-based economy into areas like forest management meant bringing together the Native corporations that owned Afognak's forests.

"If we landowners could form together as one corporation, we could cut down competition between us and increase volume by being one company," says Anderson. "Chances are we would also get a better price (for timber products)."

In 1977, two corporations, Ouzinkie Native Corp. and Natives of Kodiak, formed Koncor Forest Products Co.

Adding to the spirit of cooperation, two other Native corporations, Yak-Tat Kwaan out of Yakutat, and Chenega Corp. of Chenega Bay, soon joined the company. Subsidiaries formed by Koncor included ventures with other Native corporations across Alaska.

"There's been a high spirit of cooperation among the owners," says Tony Drabek, president of Natives of Kodiak. "I would attribute much of the success of Koncor to that cooperation."

"Many of the people I'm partners with, I went to high school with in Mount Edgecumbe," says Anderson. "We aren't strangers. We live together. We understood each other. We still do."

From tiny Afognak, Koncor grew to cover forest projects all over Alaska: along the Kuskokwim River in the Interior to Cube Cove in the forests of Southeast. For more than a decade, the company has exported round logs from Alaska to Pacific Rim countries and sawmills in the United States. Today, the company markets Alaska timber and products to customers as far away as the Middle East. Annually, the total of all Koncor's enterprises pours millions of dollars into the state economy.

If cooperation gave Koncor a firm foundation, what spurred the company's growth?

Timber Expertise

There are two ways to sell timber, says Sturgeon. Stumpage sales allow the timber owner to sell wood to a buyer, who must do everything from cutting the trees to finding markets for wood. Such a sale gives the seller less risk (the buyer assumes it all) but also normally brings the seller the least amount of profit.

With the second alternative, the timber owner cuts the wood and takes it to market independently. Here, the seller assumes all the risk in selling the timber on the volatile world market, but also has the chance to earn greater profits.

Koncor chose to market the timber itself. To find a niche for Alaska's wood in the competitive world timber market requires expertise.

"Our company provides that expertise," Sturgeon says.

That means knowledge about environmental permits. Engineering roads. Controlling the harvest of timber within a cutting unit. Marketing the wood around the world.

To provide some of that expertise, Koncor relies on technology, such as computerized mapping systems. Other techniques the company uses are simply good business principles.

Sturgeon points out, "We do a lot of contracting. We want to keep our company fairly lean. Contracting services allows Koncor to adapt quickly to changing markets and conditions." As a result, Koncor has become a debt-free company with considerable assets, capable of producing substantial revenues. It's a great position to be in. Back in the mid-1980s when timber market prices were low, Koncor had the capital to make timber acquisitions across Alaska. In 1992, 90 percent of the company's profits come from those acquisitions.

Another technique Koncor depends on is getting along with its partners. "We are concerned about being real straight shooters," Sturgeon says. "We have good references from our partners. Our good track record is one of our building blocks."

All the way down the line of Koncor's subsidiaries, you hear affirmation of this belief. At Cube Cove in southeast Alaska, Shee Atika Corp. and Koncor own a subsidiary called Atikon Forest Products.

"Koncor has been a terrific partner," says Jim Senna, president of Shee Atika. I think the resulting sales of our timber certainly reflected nothing but the best understanding of the market."

In 1988, Koncor joined forces with Citifor Inc., a Chinese company, to form Citikon, which sells Alaska timber to all the Pacific Rim markets. According to Citifor vice president Bob Rice, "The joint venture works very well. We've had good cooperation and good results, and we're really pleased with the way the whole operation works."

A final technique for Koncor's success is: "We take the environment seriously," Sturgeon says. "Even though we are a private company, our forest management operations must include public concerns."

Enterprise and the Environment

On the wall of Koncor's Anchorage office hangs a plaque, given to the company in 1990 by the United Fishermen of Alaska (UFA) as a "co-existence award." Words engraved on the plaque acknowledge: "Koncor's good faith efforts to voluntarily comply with the riparian standards of the proposed Forest Practices Act... (UFA) appreciates Koncor's efforts to co-exist with the fishing industry in a more harmonious fashion."

"We're proud of that award," Sturgeon says. "It shows how hard the company works to meet the strict environmental regulations that govern Alaska's precious forest resources."

Don Gentry, general manager of Atikon Forest Products, says, "The many corporations which we work for primarily derive most of their income from fishing. They have given us a mandate that when we are harvesting their land, we try to protect the fisheries. We go a little bit further than other companies because we are only being responsible to our owners, the Native corporations."

It's not idle boasting. Tom Boutin, state forester for Alaska, says, "They (Koncor) are certainly exemplary, and they certainly would be any place in North America."

He cites the fact that Koncor does independent water quality testing and regeneration surveys, which shows initiative. Koncor has voluntarily left many buffers along lakes and streams where it believed protection was required or where government agencies asked for buffer zones. The company has also shown innovation in building roads around sensitive wildlife areas.

Frank Rue, director of the Alaska Department of Fish & Game's Habitat and Restoration Division, says former Alaska Gov. Steve Cowper gave Koncor an award prior to the passage of the state's Forest Practices Act in 1990. "Koncor voluntarily complied with the stream buffer requirements even before it became law," Rue says. "Gov. Cowper and we at Fish and Game thought that was pretty enlightened behavior for a company to do."

Forests for the Future

Working with the environment, not against it, will continue to guide Koncor's future investments.

"We've taken the position that there's a resource there that we can convert to cash, but we've got to be very, very careful of how we do that," says Tony Drabek of Natives of Kodiak.

So far, Koncor has richly rewarded its Native investors. Andy Anderson of Ouzinkie Native Corp. estimates that next to the fishing industry, Koncor brings the second-largest economic impact to his community through logging and long-shoring jobs, goods and services, and shareholder dividends.

"Many people would be on welfare or on certain types of social programs if not for (Koncor's) programs on Afognak and in other areas," Anderson says. "I credit all this to the management of Koncor."

Drabek says that in addition to providing dividends, profits from Koncor are invested into other projects, which further diversify local economies. For example, Natives of Kodiak was a major investor in Alaska's newest bank, Northrim Bank.

"We look at Koncor as a very long-term business, a business that we hope to pass along to future generations of shareholders," he says.

"Our people have been here since the beginning of time, and we hope that they will be here forever," Drabek adds. "We want to be careful about what we do with our lands so that we ensure a healthy forest and forest system. It's a little more expensive to do business that way, but our view is that it's a cost we are willing to bear."
COPYRIGHT 1993 Alaska Business Publishing Company, Inc.
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Title Annotation:The New 49ers; Koncor Forest Products Co., Anchorage, Alaska
Author:Wooding, Jeannie
Publication:Alaska Business Monthly
Date:Oct 1, 1993
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