The North West Company
Almost from the beginning Rupert's Land had been penetrated by independent fur traders. In fact, Radisson and des Groseilliers were merely the first in a very long line of such men. For the independents the existence of the Hudson's Bay Company Charter was a minor annoyance rather than a real impediment to business. Realizing that no monopoly could be enforced where the Company had no presence, they staked their claims in the interior. Meanwhile HBC established a small chain of forts along Hudson Bay, and waited patiently for the natives to arrive each spring with another season's worth of furs.
Notwithstanding the travels of Henry Kelsey, Anthony Henday, Joseph Colen and others, who reported the presence of French traders inland, it wasn't until 1774 that the Company realized it had to protect its interests. When Samuel Hearne was sent inland that year to establish Cumberland House, HBC's first interior post, he situated it not far from Fort Pasquia (Opasquia; Paskoyac; modern day The Pas), a post founded by the sons of Sieur de la Vérendrye in 1741. HBC had begun to recognize that the amount of fur arriving at the Bay was being negatively impacted by the "pedlars" (as it called the French) who were choking off the supply at its source.
North West Company coat of arms, ca. 1800-1820
By 1784, another fur trading company had begun to have a serious impact on HBC's profits. The North West Company (NWC) was a partnership of nine different fur trading groups and soon became HBC's most powerful rival. It had been founded in 1779 when his support of a British embargo of the Great Lakes - intended to deny guns, ammunition and goods to the rebel Americans - led the governor of Quebec to refuse to issue trading licenses to the Montreal traders. Although persuaded to change his mind, the damage was done. It was too late in the year for goods to reach the farthest regions and many merchants suffered serious losses. It occurred to one of them, Simon McTavish, that the traders' influence would be greater if they worked together. Not only would they have more clout, but they could pool resources, minimize risks and share the profits. The North West Company was born.
For the first few years the company existed as a series of short-term partnerships which lasted for one trading cycle each. But by 1783 the NWC was a permanent entity. Led by shrewd, courageous and enterprising Scottish-Canadian traders from Montreal, the NWC quickly built a commercial structure which spanned the continent, the first North American company to operate on such a scale. In doing so, it openly defied the Royal Charter.
Unlike the sedentary Baymen, the men of the North West Company were constantly on the move. The Nor'Westers, as they were known, lived, wintered and worked mostly to the west of Hudson Bay. Vigorous competition for the fur trade took them over the Rocky Mountains and even to the Arctic Ocean. Most of the key explorers of these regions - Alexander Mackenzie, Simon Fraser, David Thompson and Peter Pond - were Nor'Westers. They showed their disdain for HBC's Charter rights by building their forts right beside those of HBC at strategic trading points. One such location was Edmonton, where HBC's fort and the NWC's Fort Augustus were neighbours.
The NWC was different from HBC in significant ways. Based in North America it was owned and operated by men who were themselves active in the business. Many of the partners had themselves travelled into the interior and traded there. These hivernants - or "wintering partners" - well knew the business they directed and had a personal stake in the company's success. They were, for the most part, Scots, and were bound by ties of nationality as well as close kinship through the clan structure. In contrast, HBC's directors and investors were primarily English noblemen and financiers, who governed the Company from afar. Their interest in the business was overwhelmingly financial and their actual knowledge of the trade was second-hand at best.
But the key difference between the two companies - and the one which would ultimately prove insurmountable to the NWC - was economic. The sea route to Hudson Bay, notwithstanding its attendant hardships, was a huge advantage. It enabled HBC to benefit from a short business cycle. Ships could leave England, travel to Hudson Bay, offload goods, pick up furs and return to England in the space of about 5 months. A complete business cycle - from shipment of goods to return of furs in payment for those goods - normally took 14 months.
The NWC's cycle was much longer and more expensive. Its voyageurs had to cover four times the distance overland as did HBC simply to reach Lake Winnipeg. Canoe brigades leaving Montreal in late spring took 8 weeks to reach Fort William, the NWC's great inland depot (modern Thunder Bay). There the previous year's furs were loaded for the return trip to Montreal where they arrived in September. They would not be sent on to London for auction until April of the following year - almost a full year later.
Detail showing trade routes for Hudson's Bay Company and the North West Company, map by Jack McMaster, 2004
Meanwhile the goods offloaded at Fort William were shipped further west and north, arriving at their final destinations before freeze up. Traders could not ship the season's furs out until the following summer, after the thaw, for the return journey to Fort William and onward to Montreal. The complete business cycle was almost 2 years, closer to three if one accounts for the procurement of trade goods and eventual sale of the resulting furs in London. The further the distances travelled, the greater the costs incurred - and the lower the profit. As the NWC expanded to the Pacific Northwest and the Athabaska regions - both areas rich in prime furs - profit margins decreased.
Competition was one thing, but the stakes were upped considerably when in 1811, HBC sold over 74 million acres in the Red River valley to majority shareholder Thomas Douglas, Lord Selkirk. Selkirk planned to use the land to settle displaced Scottish highlanders, the first of whom arrived in 1812. The Selkirk settlement not only straddled the established NWC route to the Northwest, but also encompassed a number of important NWC forts such as Esperance, Dauphin, Souris, Pembina, Gibraltar and Bas-de-la-Rivière. This immediately caused friction. Adding to this was the issue of settlement itself. At the best of times the farmer and the fur trader are poor neighbours: the success of the former usually depends on clearing the forests that support the animals sought by the latter. But in Red River these tensions were exacerbated by the presence of a unique local population - the Métis.
The children of First Nations and Europeans, the Métis were well established in the Red River valley. They had built a thriving local economy based on agriculture and the buffalo, producing pemmican on a large scale which was sold to the NWC for its canoe brigades. The arrival of surveyors and settlers, neither of whom recognized their claims to the land, provided the tinder for an explosive confrontation. The Métis and the Nor'Westers became natural allies in the developing struggle with Hudson's Bay Company.
Simon McGillivray, ca. 1805
Events soon came to a head. In 1815 Selkirk Governor Miles Macdonell issued an edict forbidding the export of pemmican - or any other foodstuffs - from the colony in addition to a ban on the buffalo hunt within the colony's boundaries. Enough was enough. At their annual meeting in Fort William the NWC partners agreed that the settlement had to go. Over the next year a series of attacks and counter-attacks, arrests and general harassment escalated, culminating in the so-called Battle of Seven Oaks in June 1816. An armed confrontation between the Métis and Hbc resulted in the deaths of 21 men.
The massacre at Seven Oaks changed everything. The relationship between the two fur companies became a struggle for supremacy rather than a contest for commercial advantage. Both companies lost sight of the trade in the process. But eventually, both grew weary of the strain. While expending all of their efforts competing with each other, neither organization could grow. In the final analysis it was HBC's deep resources of credit that enabled it to weather the lean times, sit back and watch the NWC overextend itself.
Senior management of both companies knew something had to be done and started to discuss a merger. The British government was also eager to see the conflict resolved. The final agreement reached on March 26, 1821 was put together by Andrew Colvile representing the Hudson's Bay Company and Simon McGillivray and Edward "Bear" Ellice representing the North West Company.
By the terms of the agreement the two companies pooled their assets valued at £200,000 each. The new entity would operate under the Hudson's Bay Company name and under the terms of its Charter, which was renewed for another 21 years. New shares were distributed among a joint board composed of HBC men and Nor'Westers, as well as to Ellice, MacGillivary, the Montreal partners and Lord Selkirk's estate. Chief Factors and Traders from both organizations, chosen for their ability, were also given a stake. The majority of these men were former Nor'Westers.
The resulting company was the most powerful fur trading entity in the world, spanning the continent from sea to sea to sea. HBC gained the North West Company's most valuable resource, its traders and voyageurs, as well as rich new areas beyond the Rockies and in the far north. And now all the furs gathered throughout the interior of North America could be shipped to England through the HBC controlled route of the Hudson Strait. The Company had effectively regained its monopoly over all the lands mentioned in the Royal Charter of 1670.
But this would not be the end of the NWC. In 1987, HBC sold off its Northern Stores Department, the modern successor to the Raw Fur Department, which provided retail services to northern communities. The business was bought out by a group spearheaded by senior management. When it came time to decide on a name for the new venture, one suggestion kept coming up. In 1990 it began operating as The North West Company.