First published in SeafoodNews.com. Reprinted with permission.
Yesterday we learned that there is considerable opposition on the docks in Maine to the reauthorization of the levy funding the Maine Lobster Marketing Collaborative. The levy that funds the marketing program comes from an additional charge on lobster licenses, and has to be renewed by the legislature next year. But in a series of meetings up and down the coast, there has been some vocal opposition to the whole idea of a marketing program. Two of the seven zone councils have voted to support it, and meetings in the other five are being held this month [November].
At a recent meeting, reported on by the Portland Press Herald, Greg Griffin, a Cape Elizabeth lobsterman said, “Here’s the problem: it did not make me a penny, and it’s not gonna. My boat price has not been affected, period. Show me a guy here that is making more money because of what you do? No one. I don’t see my money returning me a penny. I am sorry.”
Many harvesters feel the same way, and they are dead wrong.
Traditionally it is very hard to get fishermen to look past the dock, when they are in effect paid at the dock. Too often, a harvester looks at the lobster or crab cash price he is being offered, and thinks the guy offering it is deciding what it is. That’s because he has seen bidding wars, and sometimes a rival cash buyer will offer 25 cents more. In this view, the price for lobster is set at the local dock, or at most, the dock across the bay. So if his cash buyer doesn’t offer more money, the levy obviously failed. Nothing could be more wrong about how lobster prices are set.
Lobster prices are set with supply and demand. The supply is unpredictable, and this year it is likely down. I have never heard a lobsterman say they’re getting more or fewer lobsters based on what they pay in for management or regulation. Everyone knows that the environmental factors that influence lobster populations are variable, and that changes in the volume landed is simply one of the risks of lobster fishing. But demand, i.e. the desire of your customers to buy lobster, is not so unpredictable. And it is not so out of control as the natural cycles of lobster populations.
In normal years, when lobsters are in short supply, prices rise as more buyers bid for the available animals. Likewise when lobsters are in good supply, i.e. landings are heavy, prices go down because there are not enough buyers to take up all the lobsters coming ashore. The short recent history of the lobster industry in Maine is one of record landings, and high prices. This has made the fishery the most valuable it has ever been.
Furthermore, the overall market has expanded, especially to China, so that there are more customers wanting to buy lobster. Just look at how many Chinese representatives are showing up on the docks in Maine with cash. This extra demand has helped create these record values, and it is likely to continue.
But this fall, things have changed. Prices at the dock are down about $1.00 from where they were in June. After years of good prices, all of a sudden we are seeing lobsters under $3.00, even $2.50 for shedders. So what is a harvester to think when his price is down a dollar, and he is being asked to support a marketing council? What he should be thinking is “I’m glad that price is not down $1.25.” But that is pretty hard for a human being to do.
The point is that in the seafood industry we live in a world of supply and demand for our products. We often can’t influence supply, but we can have some say about demand. And by working on the demand side, we increase the value of the fishery, regardless of the supply. This is what the marketing council is supposed to do.
There are other reasons specific to Maine’s lobster industry. Originally when the marketing collaborative was proposed I was against it, because I felt a better marketing campaign could be run on North American lobster, combining products from Maine and Canada. But there were people who wanted to differentiate from Canadian lobster, and so Maine went it alone. Now there is no choice but to continue.
The Canadians have got their own lobster levies in PEI, and one is likely coming in New Brunswick. In Nova Scotia, the levy is stalled. Yet the Canadian government also gives its lobster industry tremendous export support. They not only sponsor trade missions and food shows in China, but they negotiated a tariff-free deal with the EU that is going to give Canadian lobsters a huge advantage.For Maine to reject its lobster marketing council at this point would be like throwing down your weapons at the point you are cornered and need to fight.
Maine lobsters are definitely in danger of becoming the second choice product. How can this happen when Maine has such a good reputation and Maine lobster is an iconic brand?
It can happen because of shortsightedness on the part of harvesters. Maine lobsters are primarily sold to tourists in the summer, and the growth of the brand has largely been due to these tourists going home and wanting to continue to eat lobster like they had in Maine. But the market has grown to be a global one. China is buying ‘Boston lobsters,’ not Maine lobsters. Canadian lobsters — branded with the maple leaf — will soon dominate Europe. Maine has got to find some markets where it can be the number one product, and quickly. This is where the marketing council kicks in.
Alaska supports its fisheries with an industry-paid marketing budget of about $17 million this year. This is what keeps Alaska products flowing to Japan, it is what opened up wild Alaska salmon in China, and it is what keeps Alaska pollock differentiated from Russian pollock in Europe.
Norway has the largest global seafood marketing program through the Norwegian Seafood Export Council, with a budget of about $50 million this year, again paid by the industry through a levy or tax on exports. Norway spends this money in dozens of key export markets, including the U.S. It is no accident that Norwegian salmon has become increasingly visible here. The Maine Marketing Collaborative has a tiny budget by comparison, $2.2 million. Yet with this small amount of money, the group has to set out some markets where Maine is the brand of choice.
There is opportunity to do this both in the U.S. and China. But to defund the program because harvesters don’t see a penny returning is literally to throw the fire extinguisher overboard because it is too heavy, just at the point the fire is getting started.
The U.S. lobster industry is going to have a tough time. Right now, demand is weaker on frozen lobster, live prices are lower, and companies who jumped on the lobster band wagon when wholesale prices were attractive are now jumping off. It sometimes takes a restaurant chain nine months to a year to reconfigure menu options. The current crop of reduced use of lobster is a reaction to the prices a year ago. It won’t come back overnight just because prices are lower this month. It has to be earned back program by program, and the marketing collaborative can help in this process.
In short, without fighting to get these markets far from Maine, the U.S. industry will have to sell what they can locally, or to discount what they sell in other markets as the second-class product. Refusing to pay to fight for share in these new markets and distant markets is like buying a $250,000 truck, but not being able to drive more than 100 miles because on principle you won’t pay tolls.
We strongly support the renewal of the Maine Lobster Marketing Collaborative budget because we think there is trouble ahead for the Maine fishery and think it is crazy to disarm in the face of what is coming.
The real question is not ‘has this program made me a penny,’ but has this program helped me make a better living lobstering both when prices are high and when they are low. There we think the answer is yes, and the program should be continued.