The Canadian lobster industry is set to undergo significant changes this year that will not only affect fishers and processors, but also consumers. At the Canadian Lobster Value Recovery Summit, held in Halifax last week, stakeholders agreed to implement a levy system by next year (although, the details are incomplete). The hope is that applying a levy on each pound of lobster meat caught and processed would go to marketing these as reliable, high standard, Canadian products. Doing so will expectantly expand consumer interest and demand, aiding this unique industry. However, the additional cost could potentially dissuade those who currently enjoy Canadian lobster at current prices–which are at all-time lows.
Implementing a levy does have some potential to bolster the industry. Charging $0.01/pound from both harvester and processor would raise an estimated $25 million annually according news reports on the Summit. The lobster landings have been increasing in recent years with an average between 50,000 and 55,000 tonnes, but exceeding 74,000 in 2012, the expected revenue could potentially increase if this trend continues. Money from the levy will help brand Canadian lobster and market it to consumers. Having a recognizable and well known product is becoming more and more important as companies in the US have started their own marketing initiatives causing increased trade competition. Yet, there are concerns about the effectiveness and efficiency of using a universal marketing scheme for a product that has such a diverse group of producers.
Furthermore, it will likely stabilize the price of lobster. Atlantic Canada’s lobster haul is high lately, which has reduced prices to extraordinarily low levels. Harvesters are not reducing supply to control demand, because they are also in competition with one another and, therefore, each individual company wants to reach their quota. By increasing the marketing effort, in addition to taking advantage of new trade opportunities, however, the lobster industry is confident that it can support a greater consumer base, which would also lift prices to a more sustainable level. Trade agreements between Canada, Europe, and South Korea bolster this opportunity and proper marketing will help attract new consumers.
Domestic consumers are unlikely to welcome the price increase that will result from the proposed levy, though, and when it comes into effect, those who have become accustomed to inexpensive lobster during years when supply exceed demand could reduce their demand. Unfortunately, however, the price of lobster is unsustainable for the industry as a whole. Some fishermen have had to exit the industry lately, unable to break even with expenditures on wages and rising operating costs (such as oil). If the Canadian lobster industry can increase their customer base through marketing and sustain this increase in prices, it has the opportunity to expand and become a profitable industry in the Canadian economy.
There are already quota and licensing systems in place for harvesting Canadian lobster and, so long as the levy functions efficiently, the lobster industry stands to achieve significant gains from the proposed changes. The supply of lobster depends largely on the systems already in place and the new system aims to increase demand in order to meet the available resources. It is important for the rest of Canada to understand that increasing lobster prices and selling in new markets will benefit the entire country by strengthening the Canadian lobster industry and, as a result, the economy.
Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute