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Northern Sales Co. of Alaska Inc.: Southeast wholesale suppliers.

Using modern business techniques to provide wholesale service, this Juneau company is positioned to compete with national chains.

In 1961, Alaska was still considered unsettled, uncivilized. For most state residents, it was impossible to procure some of the finer things life has to offer. For that matter, most necessities were also scarce.

Southeast Alaska had it worse than the rest of the state. Because the main point of distribution for the state was in Anchorage, Southeast tended to be isolated, cut off from the mainland by the Gulf of Alaska and treacherous coastal mountain terrain.

To meet the demand for wholesale goods of a slowly increasing population during the early 1960s, Northern Sales was founded by entrepreneur Glenn Leach and incorporated in Juneau. At the time, Northern Sales was a small operation distributing to local merchants only. In 1968, Leach was able to obtain exclusive tobacco distribution to the Juneau area, and business began to grow.

From 1968 to 1988, Northern Sales expanded throughout southeast Alaska. During the early days of the business, Tom Satre, now company president, was hired to work in the warehouse. Over the years, with hard work and a lot of effort, Satre advanced to his current position, accumulated company stock and gained ownership of Northern Sales.

In 1973, Satre and his wife Kathy and Tom Shornak founded Sitka North Sales. By 1977, a branch of the original Juneau-based company was established in Ketchikan.

Growing a Business

In 1983, the Satres and Shornak sold the Sitka operation to Michael and Michal Beth Elerding of Ketchikan. Michael was a branch manager for First Bank, managing accounts for Sitka North, when he heard about the possibility of buying the distributing company.

Both the Elerdings and Satres figured a merger between the two companies in 1988 would provide a larger network and streamline Southeast distribution of wholesale items and commercial products. The new company was called Northern Sales Co. of Alaska Inc.

"Originally they (the Satres) wanted to form a partnership," says Elerding. "We just weren't ready for that at the time. So we bought the business with an agreement not to compete for five years. After a few years, both companies wanted to expand. By selling the same products in the same places, we would be bloodying ourselves instead of working together from a stronger position. We gained synergy by merging."

Following the merger, an important step was accomplished in the evolution of the distributorship when Northern Sales secured a warehouse in Kent, Wash. Tom Satre says opening the Kent warehouse enabled them to access freight consolidators and use the facility primarily as a consolidation warehouse.

Corporate headquarters are in Juneau, but with offices in Ketchikan and Sitka, Northern Sales can disperse products as far north as Yakutat and Cordova, and as far south as Petersburg and Wrangell, serving many communities in between such as Craig, Angoon, Klawock, Hydaburg, Haines and Kake.

Northern Sales also distributes to other bush communities isolated from the main distribution points of Fairbanks and Anchorage.

Transportation of Northern Sales freight begins in the Kent warehouse, where products and equipment are barged to Alaska.

A system called direct store delivery (DSD) ships products by one carrier from the warehouse all the way to the merchant's door.

"One of the keys to our success is our DSD," says Michael Elerding. "We distribute products like Frito-Lay, Orowheat Bread and Pepsi through DSD, and we are the exclusive distributors for all three products for the Southeast."

Gross revenue for Northern Sales in 1991 was over $22 million and over $24 million for 1992. Tom Satre says, "Growth in revenues should be on the average of 5 percent to 8 percent over the next two to three years."

Responding to Change

Northern Sales was able to reduce its cost of goods sold from 84.89 percent in 1991 to 84.69 percent in 1992, creating an increase in its gross revenue margin from 15.11 percent to 15.31 percent.

"We are responding and changing to the market rather than being market specific," says Kathy Satre. "We try to offer a distribution channel that can extend heavily throughout southeast Alaska. We're in touch with every account, every transportation system and potential account in Southeast. We concentrate on keeping the distribution channels open and maintaining good relations with our retailers and suppliers."

To preserve efficiency, Northern Sales employs about 76 people, varying with the season. Kathy Satre says that the company's summer sales volume is close to double that of a normally flat first quarter.

Meeting the Competition

With the changing market in Juneau attributed to the opening of the Costco store and a Kmart outlet, Northern Sales will be re-evaluating its market strategy.

"It is such a changing market right now," she says. "Everything is changing in response to the mass merchandisers, so we are trying to step back and see what is left for us."

Tom Satre notes that the mass merchandisers will not necessarily have a bad effect on business in Southeast, and Northern Sales is currently adjusting its strategy by expanding distribution to the Bush and Anchorage.

"We're looking to drive more business westward to rural bush communities and broaden our customer base," he says.

Mike Elerding adds, "It's too early to tell for sure. They (wholesale retailers) may have an effect on our Juneau business, but they probably won't be a factor for the Ketchikan or Sitka areas. We fully expect to be suppliers to the mass merchandisers."

Only the future can tell what lies ahead economically for Southeast merchants. But you can bet Northern Sales is a large piece of the economic puzzle and is prepared to assume the position at the head of the supply pack.
COPYRIGHT 1993 Alaska Business Publishing Company, Inc.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:The new 49ers
Author:Musgrove, Michael
Publication:Alaska Business Monthly
Article Type:Company Profile
Date:Oct 1, 1993
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