ShareThisA few years ago, Peggy Perry found herself scratching her head over the cost of ice.
Her store in Canada -- Calgary-based Willow Park Wines and Spirits -- sells bagged ice along with a wide variety of alcoholic beverages. When she sat down to do the math, buying the ice seemed unreasonably expensive.
Perry, Willow Park's vice-president for marketing and purchasing, figured there was "something fishy going on."
And she realized "if we made our own ice we'd make a small fortune."
Perry was right. For $5,000, Willow Park bought an ice machine. It paid it off in months. The store now sells ice at $2 a bag -- less than the Calgary going rate of $2.50 -- but still manages to turn an 80-percent profit. It is likely the store's highest-margin product, she said.
In a country where ice comes both free and unwanted for months of the year, frozen water isn't something people spend much time thinking about. And the price of ice, often an impulse buy on a warm summer day, doesn't get much attention, either.
"They call ice the forgotten food," said Glenn Davies, one of the partners in Victoria-based Vancouver Island Ice Depot Ltd. "Nobody cares how much they pay."
But over the past few years, those forgotten prices have suddenly gained prominence in the U.S., where a major investigation has led to several conspiracy admissions from two of the continent's three dominant packaged-ice vendors, including the U.S. subsidiary of the Winnipeg-based Arctic Glacier Income Fund.
Last week, that subsidiary -- Arctic Glacier International Inc. -- agreed to plead guilty to conspiracy charges and a $9-million fine.
Arctic Glacier International admitted it had engaged in a cartel-like "market allocation" scheme, essentially carving up the market with competitors to keep prices high, in Detroit and southeastern Michigan.
In separate charges, three executives of Arctic Glacier International -- Frank Larson, its former senior vice-president of operations, and Keith Corbin and Gary Cooley, both former vice-presidents of sales and marketing -- pleaded guilty to participating in the conspiracy, and promised their co-operation with investigators.
More than two-thirds of the $900-million in packaged ice sales in the U.S. come from three companies: Arctic Glacier's U.S. business, Dallas-headquartered Reddy Ice Holdings Inc. and Cincinnati-based Home City Ice Co. Home City Ice pleaded guilty to similar charges last year. The Federal Bureau of Investigation has also searched Reddy Ice offices.
In Alberta, a small icemaker successfully sued Arctic Glacier's Canadian business for anti-competitive practices, including offering a bribe to a customer. An Alberta judge found that Arctic Glacier resorted to "outrageous conduct" to maintain its market dominance.
In 2007, Polar Ice Express Inc., a small Edmonton-based icemaker, was awarded $50,000 in damages, plus nearly $100,000 in legal costs, after convincing the court that an Arctic Glacier employee offered a $10,000 bribe to a customer in the cement industry. The bribe was offered -- but not accepted -- in exchange for an exclusive contract that would have shut out Polar Ice.
The judgment, which was upheld on appeal, also shed light on the pricing power Arctic Glacier had. Before Polar Ice showed up, Arctic Glacier charged the cement company $4.65 for a 26-pound bag of ice, plus shipping.
That price stuck Polar Ice owner Jerry Antoniuk as too high. "I couldn't charge that," he said. His price: $3.25, shipping included.
Arctic Glacier's senior executives and board chairman did not respond to interview requests. In a statement released last week, the company said it has boosted an internal compliance system and pledged to co-operate with the ongoing U.S. Department of Justice investigation. Arctic Glacier said it was "unaware of such practices following our acquisition of several companies in Michigan and our entry into that market in 2005."
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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