Guest Column: The mystery of price, finally answered!

First published in Landings, September, 2016

“How the heck does the price for lobster in Canada get set?“

There. I blurted it out. It is the single leading question I have been asked at least 937 times since I got in this racket in 1981. Is there a back room in Boston, Portland or Halifax where all of the double-dealing gets done? Is there a price-setting hotline onto which only the powerful are invited? Is there a conspiracy to make setting the shore price as elusive as possible? These are the essential questions every fisherman asks over and over, and more often than not we Canadian dealers don’t have completely satisfactory answers. But I aim to resolve that challenge right here and right now.

Stewart Lamont is the managing director of the Tangier Lobster Company located in Tangier on the northeastern Nova Scotia coast. Photo courtesy of S.Lamont
Stewart Lamont is the managing director of the Tangier Lobster Company located in Tangier on the northeastern Nova Scotia coast. Photo courtesy of S.Lamont

First and foremost, I would like to say there is no conspiracy theory. There is a stupidity theory, however, that much is obvious. The lobster business is so darn competitive that dealers generally can’t agree on the time of day, much less a price for lobster. But not to worry. The stupidity theory kicks in for whomever offers the highest price. The rest of us then blindly follow, right or wrong. We pay the very same price as our next door neighbor even when that price is clearly not sustainable. Call it “the Shore Price System plus Matching Mechanism” technique. It is the aspect of the lobster business I like the least and the part that inevitably causes the most confusion and even pain.

In an ideal world there would be no single shore price. We would recognize the that business model is irrational. There instead would be multiple shore prices reflecting the quality of the catch and the demand in a given area. We would be creative individually, transparent and responsive. We would pay a price relative to the quality in the crate. We would not pay fishermen with 11% culls the very same price as fishermen with 3% culls. We would analyze the catch carefully and pay accordingly. The better the product, the better the price. We would disregard what the buyer two wharves away was up to. We would bring fishermen into the fold and take on the world together!

We do not have a multi-price system in Canada because lobster dealers were never math whizzes in high school. We like it plain and simple even if plain and simple is clearly inadequate.

“One price fits all is the motto,” regardless of quality factors. Because this system is incredibly simplistic it is much more manageable. Don’t ask us to bring quality criteria into it — unfortunately right now that’s not what we are all about.

And guess what? Canadian fishermen almost always prefer simplicity as well. They don’t like multiple prices and quality benchmarks any more than the dealers do. They like a single price, the higher the better. “Don’t be too critical of quality,” they say. “Mother Nature’s in charge of that part.” They are just the delivery folks, they claim.

So the price is not set by any one source. The shore price reflects a continuum going back a long, long way. We tweak it up and tweak it down as circumstances demand and allow. When in doubt we always pay .50/lb. more than the market will permit. We aren’t business geniuses after all, we are lobster dealers, first and always. We’d rather own the resource at too high a price than not own it at all.

Conversations dealers have with each other are not persuasive. There is always one dealer out there who wants to pay more, for whatever reason. And inevitably, if it is humanly possible, all of the other dealers gravitate to that higher price benchmark. Frankly it is still amazing to me. It is a model that would be thoroughly condemned by the Harvard Business School. We knowingly pay more than the market supports 90% of the time. Then we try our best to pass on these costs to the next lucky buyer. Passing on higher costs is more an art than a science, however. Last winter it was a dismal failure in Canada. This summer it remains a fascinating work in progress.

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