Luxury or Commodity:
Lobster’s Wrenching Transition
by Sandra Dinsmore
An endless flow of old and new seafood combinations at the Boston Seafood show 2012, the country’s largest. Hundreds of exhibitors, mostly foreign companies seeking access to the U.S. market. None of those importers are selling American lobster. Prepared this way, A grade, shedder, spiney would appear to be the same to most consumers. Fishermen’s Voice Photo
Eight years ago Maine fishermen began to catch over 60 million lbs. of lobster a year. Over the last four years catches expanded by 50 percent; and in the last two, as we all know, they have been well over a hundred million lbs., with each successive year’s catch phenomenally higher than the preceding one. Season after season Canadian fishermen have also experienced similar incredible increases in landings; in fact, Canada began to catch more than 60 million lbs. a year ten years before Maine did. Ever since then the lobster industry has been working on how best to cope with so many fragile, highly perishable animals.
Lobsters can be kept alive and in good health for only so long. Even when they can be kept alive longer through cold water systems, the systems are expensive to build and operate, and there aren’t enough tankrooms to keep massive amounts of live product in inventory. Processing— cooking and freezing—has become the way to go.
Not only has frozen lobster meat become more popular, it is purchased more frequently than live lobster because in this era of fast food, frozen lobster meat is far easier and faster to prepare than cooking from scratch. For families with both adults in the work force, “heat and serve” meals make sense. As Rob Bauer, General Manager of Southwest Harbor’s Beal’s Lobster Pier, observed, “The population wants more convenience. The average age of a live lobster eater is probably 65.”
Geoff Irvine, executive director of the Lobster Council of Canada notes that Canada’s 35 major processors traditionally buy approximately 75 percent of Maine’s catch each year to process in Canada, along with the poundage caught by Canadian fishermen. But with Maine dealers feeling they can reduce their shrink by processing their lobster here in the state instead of shipping it to Canada, an increasing number have made cooking and freezing lobster meat part of their businesses.
According to Maine’s Department of Marine Resources [DMR], in 2012, 16 companies purchased the lobster processing license required by the state to process lobster. If a company has several locations, each requires a separate license. These 2012 licenses will expire at the end of March 2013 and will need to be renewed for April 1.
It takes 4 to 6 lobsters, depending size and quality, to make 1 lb. of lobster meat. Bauer makes a serious point when he says, “Even if you cooked every lobster we landed in Maine, that would still mean only 30 million lbs. of lobster meat, a month’s production for a typical Midwestern meat plant.” But each of those 30 million lbs. of lobster meat costs $30; that’s $900 million dollars worth of lobster meat.
As East Coast Seafood vice president Spiros Tourkakis explained to a group of lobstermen in January, “We landed 21 million lbs. in 1992 and 123 million in 2012. The market that has benefited [from] this increase is the frozen market.” And that, Tourkakis noted, is because it is easier to reach volume markets by shipping frozen rather than live lobster. He noted more convenient logistics, less transportation cost, less shrink, and less price volatility.
Canada’s Irvine, though, noted, “Our trade data shows a majority of lobster sold to China is in live form, something like 85 percent,” and added that sales of whole cooked and frozen are growing. He went on to say that the Chinese traditionally like all seafood whole, including the head, and they want it live when they first see it in a restaurant’s aquarium. Hong Kong expatriate Sean Dinsmore agreed that Chinese prefer live seafood when they dine out. He said, “They love to pick out the fish in a tank and then often the waiter will bring it live and kicking to the table so everyone can see the fish they’re getting.” He presumed the same would be true of lobster.
With the vastly increased numbers of lobster landed, though lobster has been transitioning from a luxury food to a commodity. “We’ve all seen lobster rolls advertised at Burger King,” noted a midcoast lobster buyer. In fact,” he said, “the commodity aspect has come about because companies responded to all these lobsters and created markets for frozen processed items.” He said of Maine and Atlantic Canada, “We went from a handful of plants to nearly 50. Think about it, I’ve heard estimates that 72 to 77 percent of the North Atlantic lobster catch is now being processed. That also means that a very real shift in market share has occurred: live lobster losing to processed, the convenience of ‘right out of the freezer’ by the end user segment of our business. It’s become a pennies rather than a dollars business.”
The end user has voted for the convenience; and the lower cost of lobster cooked or raw straight from the freezer has hurt the live lobster business. But Jonesport lobster broker Toni Lilienthal thinks frozen lobster lacks that quintessential something that fresh lobster has that is satisfactory to the palate. She referred to fresh meat as a delicacy and said, “It’s fresh and it tastes good and it tastes like you just cooked it. What I want to see in the lobster industry,” Lilienthal said, “is a product of the highest quality in looks, taste, and freshness. This product would be a luxury because of the cost.” However, she warned, “If we continue to do things the way we have been, lobster will be a commodity.” Lilienthal stated, “We need to add quality to the processed product to make lobsters valuable again.”
The long tradition of eating live lobster is giving way to processed, cooked or frozen, lobster. The change is driven by changes in the way humans and lobster now live. Humans live a more rushed and urban life. Lobster live among fewer predators and many more of each other. Processed lobster is becoming the practical necessity. Will Hyler Photo
But the problem is not just quality. The low price of lobster to the fisherman is where the problem starts. And last summer the price to Canadian and US fishermen hit bottom. Maine shedders normally appear around July 4th, after tourists and summer residents have arrived to buy them, but last year was not normal. Shedders appeared at Kittery in April, and by May, dealers had to go to a split price. But that month, with more traps in the water, catches got ahead of dealers’ ability to sell them because seasonal markets had not yet opened. By July 4th the phenomenal catches turned into a glut, which brought the Maine boat price down to a 30-year low of $1.60/lb. and a Canadian shore price to $3/lb.
“We need to sell more frozen lobster meat,” Bauer said, but that, itself, presents a problem. “Lobster meat, at $25 to $35/lb.,” he said, “is still way more expensive than competing forms of protein: steak, shrimp, scallops, salmon, and tuna. To sell lots of meat, we need [the price per lb.] to be in the mid-$20s, and that means a boat price of $3/lb., not $4.” He stated, “I think the low price is something lobstermen are going to have to live with. No amount of marketing is going to change the supply-demand curve for lobster meat,” he explained, “because there are too many choices for the consumer to spend $30 per lb. on that are as good, if not better than lobster meat.”
Nova Scotia processor Frank de Waard, of Aquashell, agreed that the transition to a commodity started years ago, the main cause being the enormous increase in supply in recent years. “If that trend continues,” he said, “our challenge becomes to convince the consumer to eat lobster on a more regular basis versus just consuming during special occasions.”
But processors haven’t developed a way of cooking lobster that, after being frozen, defrosted, and heated tastes freshly cooked. Kittery lobster dealer-exporter Tom Flanigan, of Seaview Lobster, though, said he disagrees “slightly with the whole premise in the sense that frozen products have been around for a long time now, and the quality of those products has improved over the years for both tails and the meat product.” He thinks a lot of the price factor for frozen lobster is a supply issue, and said, “The other thing ... that no one wants to address ... is the quality issue. Dealers see quality more directly,” Flanigan said. “Fishermen understand it to a certain extent; some more than others.” In the twenty years since he fished, Flanigan said landings have become four to five times what they had been. “The quality of the product has changed,” Flanigan noted and mentioned the term, the economic value of scarcity. “Part of this year felt like a situation where everyone had lobsters; and in that situation,” he said, “it’s hard to seek value for the same reason that dirt is worth less than diamonds. From our standpoint, the biggest factor as it relates to price, is quality.
“You can talk about marketing efforts as much as you want,” Flanigan stated, “but I defy anybody to come to any lobster dealer from July until early December when we’re going through lobsters the day after they come off the boat and tell us how to better market roughly, give or take, a third of the product. That product essentially has no home other than a processor.
You’re in a situation many times where it is not how much you’re going to pay me [for the third that’s processor grade] It’s, ‘Please come and take them’.” He said the line he throws out is, “We don’t need a lot of help marketing hard shells or A-grade halves.” The problem, Flanigan admits, is selling and getting value from that highly perishable processor-grade third of his product.
But frozen products keep dropping in price, which the midcoast lobster buyer finds troubling. “It’s a bleak picture as this industry goes through this wrenching transition,” he said. “The boats think that dealers are making all the money; dealers are thinking that processors are making all the money, [and] sad fact: everyone except the end user is getting caught in the squeeze.”