New Economic Analysis Studies
Lobster to Dollars

by Laurie Schreiber


 

We’re interested in
the middle osf the
supply chain—
the backbone.


 

PORTLAND—A new study is underway to get an understanding of the economic impact of the lobster industry’s distribution chain in Maine.

Speaking at the 11th International Conference on Lobster Biology and Management—hosted in Portland from June 4-9 by the University of Maine and Boston University—Michael Donihue, professor of economics at Colby College in Waterville, said this is the first-ever economic impact study of Maine’s lobster supply chain.

Although Maine’s lobster industry is highly visible—and possibly the most economically important asset for the state—little is known about the economics of the industry after the product leaves the dock, Donihue said.

In 2014, the industry landed 123.6 million pounds of lobster, valued at $456.9 million—the highest-ever value of the lobster fishery in Maine. Every dollar accounted for in the value of the fishery represents revenue paid by a licensed Maine lobster dealer. But there’s not a good understanding of the economic impact coming from the contributions of the lobster dealers and processors that participate in the supply chain, he said.

These businesses not only provide the capital that pays harvesters for bringing lobsters to shore; they also account for substantial investments in handling, transporting, processing, marketing, shipping, and selling the product, as well as supporting jobs throughout the state.

The Maine Lobster Dealers Association is the key collaborating partner in creating the analysis.

Lobster landings and value have boomed in the past decade, from 20 million pounds in 1945 to 122.9 million pounds in 2016, he said.

“The real question is, what happens after lobsters are taken out of the trap?” he said. “We have a network of dealers that buy lobster directly from the harvesters, for domestic and international shipping and for processing. Dealers buy from each other, and they also import lobsters into the state. They form the backbone for the lobster distribution supply chain.”

In 2015, there were just over 300 licensed lobster dealers in Maine.

The study is important for a number of reasons, he said. One is that the industry currently faces threats from competing trade agreements, climate change, labor shortages, and insufficient infrastructure investment. Another is that telling the story, and valuing the dealers’ contribution, provides justification for maintenance, intervention, and remediation to improve efficiency and sustainability for the entire industry.

If it were not for the Maine Lobster Dealers Association opening up markets, “There wouldn’t be anyplace to sell these lobsters,” he said, calling the association advocates for the industry in trying to create a sustainable and growing marketplace.

Donihue said he crafted a proposal for the study when the Department of Marine Resources issued a request for proposals in January 2016. The contract was signed June 30, 2016. Funding for the project comes from the Lobster Research, Education and Development Fund administered by the DMR.

The study is made more complicated by the lack of vertical integration in the industry, he said. Instead, the owner/operator fishery consists of two sectors—the harvester sector and the wholesale and processing sector.

“You don’t really hear much about the distribution sector,” he said. “It’s mostly invisible.”

But the dealer network is uniquely poised to talk about their contribution to the industry, he said.

The study begins by tracing the dealer distribution network, he said. More challenging, he said, is to attempt to put an economic value on the network.

The study will also attempt to do broader outreach by telling the dealer’s story, he said.

“We’re interested in the middle of the supply chain—the backbone,” he said. “We’re looking at what happens after lobster is purchased from the wharf, from the co-op, or from the buying station, and goes to processors and dealers.”

Donihue said that, rather than take the “follow the lobsters” approach, he taking a “follow the money” approach. That’s because much of the product is significantly transformed into value-added products by the time it reaches consumers, he said.

Among the factors under study, he said, are job numbers, dealer expenditures, and how those expenditures are multiplied throughout the economy through indirect effects—like when a buyer needs to hire a mechanic to fix his truck.

Donihue said he developed a detailed worksheet for dealers to complete, with the goal of gathering data on upstream and downstream activities—things like where the lobsters come from, where they go, how much stays in-state, how much goes out-of-state, number of employees across different job classifications, and direct expenditures across a variety of categories, such as employees, utilities, transportation, rent, supplies, and various business activities.

Dealers lead busy lives, he said, and it can be tough to get them to fill out the worksheet.

“They have great stories,” he said. “But the don’t have a lot of availability for what looks like an audit. But what I discovered is that, if you sit down with them, you can tease out the information.”

There’s also a trust issue to overcome, he said.

“Dealers seem to be the best of friends with each other, but they’re competitive as well,” he said. Digging deep for proprietary data can be tough, “so building trust is important.”

Still, he added, “Every dealer will say this is important. Their story has not been told.”

For outreach so far, he said, he’s developed a short video for the project, with a more detailed video of the results to come; developed a web page; and enlisted the support of more dealers through on-site visits, mail-in surveys, and MLDA communications.

The project can be followed at: web.colby.edu/lobsters2dollars.

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