Mainebiz

W W W. M A I N E B I Z . B I Z 17 D E C E M B E R 1 4 , 2 0 1 5 facility with modern pumps and refrigeration tech- nology," he says. is allows him to supply product through the win- ter. Buying from about 125 Hancock County fi shermen, Greenhead purveys 10 million pounds per year, 70% bought locally and 30% imported from Canada, whose fi shing season dovetails with Maine's. "Our fi shing fi nishes up in December, and theirs is just getting started, so we want to give our cus- tomers a continuous supply," Reynolds says. Sales are split 50/50 between domestic and export markets; domestically, most product goes to the New England summer market, with other shipments going as far as Alaska and Hawaii. His biggest export market is Asia. Reynolds recently returned from meeting with potential partners in China and Japan, as part of MITC's trade mission in October, to expand awareness of Maine lobster and promote the Greenhead brand. "[Expenses] are tremendous," he says, citing labor, transportation, capital investment, and the sheer chal- lenge of maintenance and repairs in a salty environment. "It's a very competitive, low-margin business," says Reynolds, who also works to continually improve handling techniques in order to mitigate "shrinkage," the loss of dead lobsters. " e key to success is to make as few mistakes as possible," he adds. Lobster processing John Norton, owner of the processing fi rm Cozy Harbor Seafood in Portland, calculates shrinkage as one of his biggest cost implications. "Lobsters die between the time they're unloaded from the boats, into crates and through to both live lobster and frozen lobster dealers," Norton says. Norton was part of the fi rst wave of Maine's lobster processing sector. He founded the company in 1980 to process groundfi sh, then added shrimp in 1989 and lobster in 1993. e company owns buying stations on Casco Bay's Long Island and in Tenants Harbor, and buys at other stations along the coast, dealing with 400 to 500 fi shermen. In 2014, Cozy Harbor processed about 7 million pounds. Its customers are in the United States, the United Kingdom and Asia and include supermarket chains, food service distributors and wholesale distributors. A "shrink factor" is built into every point of sale: e industry accepts a standard maximum loss of 4% for dead and short-weight lobsters. "If you're starting out with a $4 lobster, that lobster actually costs, before any processing, $4.17. Seventeen cents accounts for the short weights and dead lobsters," Norton says. Among live-lobster dealers, he says, it's not unusual to have 3 to 4% shrinkage, starting out at $4.17, then to take another 4% shrink factor before moving the prod- uct on, bringing the base price to $4.35 per pound. "And each time it changes hands, you add more on top of that," Norton says. "So by the time it gets to, say, a restaurant there could easily be a built-in cost of $1 to $1.50 to account for 'deads' through the diff erent players in the system." Processors have a yield loss as they convert lobsters from whole to fi nished product. Norton says 100 pounds might yield 26 pounds of salable product. What the consumer pays for the lobster refl ects the additional cost of labor, packaging, freezing, infra- structure, transportation and cold storage. "Sales don't match up on the same timeline as supply does," Norton says. In the frozen business, processors bring in supply during the fi shing season, hold inventory and match sales to demand. "In Maine and New England, all supermarkets sell live lobsters all the time. But you get beyond the New England region and supermarkets only promote lobster at certain times — Christmas, Valentine's Day, the Super Bowl. In Japan and China, it might be Chinese New Year or the Moon Festival. So the demand side does not work with the supply side without having big inventories in the middle to be the shock absorber." e complexity of Maine's distribution system is fairly unique, says Tselikis. "We've seen a lot of consolidation in commercial fi shing worldwide and in the United States," Tselikis says. "You don't need to look further than the ground- fi sh industry in New England to see some level of that consolidation of the fl eet, but there are other fi sheries and companies within the seafood industry that have more control over the supply from sea to consumer." By contrast, the diverse lobster fl eet and the many businesses that operate in the supply chain, com- bined with the fact that this is a wild-capture fi shery, prevents real control of the supply, she says. " ere are pluses and minuses to these diff erent structures, but the fact remains that the lobster industry has kept communities like Jonesport and Stonington on the map, so to speak. If the lobster industry were con- solidated to Portland and Rockland, we'd be looking at a very diff erent coastline. is industry supports thousands of people and businesses along the coast, and we are lucky to have it." LaUr ie Sc hr eiBer, a w r ite r based in Bass Harbor, c a n b e r e a c h e d a t e D i t o r i a l @ m a i n e B i z . B i z

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