laska Native Corporations (ANCs) count on diversification among their holdings to provide meaningful dividends and services to their unique shareholders while also growing the corporation to serve future generations.

“Afognak, like other ANCSA village Corporations, is responsible for meeting economic, social, and cultural obligations to its shareholder owners—whose families live in or originate from the village of Port Lions or our ancestral village of Afognak,” says Alisha Drabek, vice president of Afognak Native Corporation.

“Like many other Alaska Native communities, the village of Port Lions is physically remote and economically distressed. Standard publicly-traded American corporations are not owned in the same manner or responsible to a tribal community in the same way as ANCSA corporations.”

Afognak’s advocacy plan focuses on social responsibilities, including natural resource stewardship, cultural protections, economic development, and community development efforts for the Afognak Alutiiq people, Drabek says.

To accomplish these goals, ANCs look for ways to grow and stabilize their business interests. For some, this means pivoting from traditional sectors—often resource extraction—to other, sometimes unexpected, opportunities.

“Cape Fox was originally focused on the timber industry in Southeast Alaska,” Cape Fox Corporation CEO Chris Luchtefeld says. “As the company progressed and the timber industry was slowing, the corporation made the decision to enter into government contracting as a way to diversify the corporation.”

With its holdings of 23,000 acres of Native lands, Cape Fox pivoted from the slowing timber industry in Southeast to government contracts and tourism. Originally, the tourism business was focused on the Saxman Totem Park. However, the corporation added the Cape Fox Lodge to its portfolio by the late ‘80s, Luchtefeld says.

While making significant headway with its federal government contracting subsidiary, Cape Fox continued to invest in local tourism ventures. Its holdings include the Cape Fox Village Store, Cape Fox Tours, the Heen Kahidi Dining Room inside its Cape Fox Lodge, Sweet Mermaids cafe, and George Inlet Cannery which offers “Taste of Alaska” tours.

The corporation saw year-over-year 2019 revenue growth of about 14 percent and is on target to see an additional 20 percent this year, Luchtefeld says, noting that it has been government contracting that has remained a strong source of revenue for the corporation this year.

“We are primarily focused on professional and technical services in government contracting, which is very process and personnel intensive. We do not have a large amount of fixed assets, real estate, or other tangible assets on the government contracting side of the business,” Luchtefeld says.

“In contrast, the Alaska tourism side of the business is very different. It is more focused on assets, marketing, and creativity. Over the last few years, we have seen a shift in tastes and preferences among our local customers, cruise ship customers, and our fishing/hunting customers. The shift has been toward unique, personal, and creative experiences, and we are doing our best to cater to those preferences through investing in new properties and renovating the properties we currently operate.”

Though the pandemic has not had a significant impact on Cape Fox’s government contracting arm, the slowdown in the tourism industry has.

“While COVID-19 and the corresponding cruise industry shutdown has slowed the business this year, we are well positioned for a great 2021 season,” Luchtefeld says, noting that over the past two years the corporation has invested more than $4 million renovating the Cape Fox lodge, purchasing and renovating new restaurant properties, and introducing new, experience-based tours.

While Cape Fox plans to continue driving growth through government contracting sectors that are not as capital intensive, such as professional services and IT services, Afognak Native Corporation is growing beyond government contracting into commercial business.

“We certainly have witnessed, over the last couple of years, how heavily reliant we have been on government contracting,” Drabek says. “It’s always healthy to have diversification, so our board and senior management have been talking about diversification for many years.”

In June, Afognak acquired Alaska-based liquor retail store Brown Jug for $21.4 million. With twenty-one locations in the state and 218 employees, the Brown Jug chain boasts $80 million in annual revenue, according to a news release.

“Adding retail sales will increase Afognak’s commercial operations revenue from 2 percent to 12 percent, which shifts government contracting from 98 to 88 percent going forward,” Drabek says. “This addition to our portfolio is a critically important diversification. Brown Jug is a financially low risk investment because the business is highly resistant to recession.”

Drabek explains that Afognak considers any acquisition based on the rate of return, risk tolerance, sales price, asset valuation, and whether the industry is consistent with current core technologies and business expertise.

The Brown Jug acquisition offers additional value to the corporation by being Alaska-based. Prior to the purchase, only about 150 of the more than 4,500 Afognak family of companies’ employees were Alaskans; after the purchase this has increased to more than 350 Alaska-based employees.

“We certainly have recognized that there’s an opportunity for our shareholders to have employment in our businesses,” Drabek says.

But many shareholders prefer to stay in Alaska, Drabek explains, and turn down opportunities to move to the Lower 48 for a career in government contracting within one of Afognak’s subsidiaries.

“We’ve had some move down to work within those businesses and find that that is just too big of a culture shock,” Drabek says. “And we have others who have been very successful and do work within Lower 48 operations.”

At the end of the day, Drabek says most shareholders want to live in Alaska, despite there being fewer opportunities for government contracting.

“We have to go where the business is best suited for its profitability because the point of an ANC is to provide benefits to all of its shareholders. Shareholder employment is only one aspect of that,” Drabek says, adding that the corporation has operations in more than twenty-five countries and territories worldwide.

After struggling in 2017 and 2018 despite its diversified portfolio, leadership at Ukpeaġvik Iñupiat Corporation (UIC) also saw the need to further branch out, COO Jeevan Pokharel says.

This year, UIC year-over-year earnings growth is on track to increase by about 36 percent, while revenue is on its way to a 15 percent increase over the same period.

Pokharel also points toward UIC’s recent push to diversify within the commercial sector, which comprises about 30 percent of its portfolio. He says he hopes to grow it to about 50 percent by 2030.

“To achieve this growth, we are strengthening and developing all of our business lines and overall operations,” Pokharel says. “Recent additions to our business lines include a new heavy civil contracting arm in Alaska and the acquisition of a majority ownership in Johansen Construction Company, a Seattle-based construction company.”

The corporation is also expanding further into vertical government construction projects, Pokharel says.

“This is still very much an ongoing process and includes looking at all of our core strengths, our available resources and working to then develop, recognize, and act on opportunities for growth whenever and wherever possible,” Pokharel says. “At the direction of our board, we are constantly considering investment opportunities in areas where we recognize promising rates of return with minimal or reduced risks.”

Pokharel says growing an ANC can be particularly challenging because not all of them are able to generate additional income through resource development.

“Still, for the last several years, UIC has been ranked in the top ten Alaskan-owned businesses and we intend to be within the top three by year 2030,” he says.

UIC’s leadership and direction are closely tied to traditional Iñupiat values, Pokharel says.

Among those attributes are many that probably don’t appear in standard American publicly-traded companies: humility, humor, spirituality, hunting traditions, and respect for nature, as well as love and respect for elders and one another.

“It’s about the spirit of cooperation, first and foremost. Our respect for one another—that is paramount because that cooperation and respect leads to trust and leads to a healthy corporation,” UIC CEO Delbert J. Rexford says.

Those values enhance UIC’s ability to meaningfully support its shareholders, Pokharel says.

“Like other ANCs, UIC is obviously committed and focused on improving our shareholders’ quality of life and providing meaningful dividends for all of our shareholders,” Pokharel says. “To be able to achieve these goals, we need to be financially strong and generate profits that we can share with our shareholders.”

Luchtefeld also points out that Cape Fox’s primary mission is to “create a long term, sustainable source of employment, educational opportunity, and wealth for our shareholders.”

Like Drabek and Pokharel, Luchtefeld sees diversification as the key to accomplishing these goals.

“By diversifying the business into multiple business lines, we are able to weather downturns in individual businesses. The COVID outbreak this year is the perfect case study for why business diversity is important to the long-term health of the overall corporation,” Luchtefeld says. “Even with a major impact to our tourism business from COVID-19, we are still going to end the year with a solid profit and revenue growth of more than 20 percent this year due to the growth in other parts of our businesses.”