Market Demand for Live and Processed Lobster in the EU:

An Overview

Richard SteadCounsellor, Seafood – Europe

Canadian Embassy in Brussels

• Trade performance

• Market profile

– Live lobster

– Processed lobster

• What can Canada do

Topics for Discussion

Currency Patterns

1

1.1

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J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J

EURO US$

JANUARY 2002 – AUGUST 2007In Canadian dollars

Lobster• Frozen in shell whole 6%• Frozen in shell excluding whole 16%• Live 8%• Meat cooked for further processing 0%• Meat cooked other 20%

Rock Lobster from Cuba – zero tariff

Value-added Tax

Other charges– import levy to support local fish market (Greece 2.3%)

EU Tariffs on Lobster

7518

765382

51

7942

2658

2312

0100020003000400050006000700080009000

2004 2005

USCanadaCubaBahamasSouth AfricaAustraliaMoroccoOthers

EU Lobster Imports (MT)

6101

2

5829

6

6032

6

6891

536

94

3265

3096

3274

01000020000300004000050000600007000080000

2003 2004 2005 2006

Value $000Volume mt

Canadian exports of live lobster to the EU

VALUE $000

2003 2004 2005 20060

5000

10000

15000

20000

25000

Belgium Denmark France Germany GreeceItaly Netherlands Spain Sweden UK

Canadian exports of live lobster

VALUE US $000

2003 2004 2005 20060

10000

20000

30000

40000

50000

60000

Belgium Denmark France Germany ItalyNetherlands Spain Sweden UK

US exports of live lobster

Live Lobster

Canadian image

• Canadian lobster known for high quality:– Low perishability– Good meat fill– Hard shell – Abundant resource– Safe and secure supply chain– Reliable suppliers able to deliver consistently

Competition

• Competitive products– European lobster from France and Scotland during the summer– Smoked salmon– Crab including King crab– French oysters– European turbot– Fresh scallops (especially at retail)– Warmwater shrimp– Rock lobster– Tuna– Sea bass– Halibut

Price

• High prices but consumers willing to pay to a point as it is notan impulse purchase– Intent is to buy a lobster supper

– BUT high prices in January 2007 caused consumers to shift to other products

• Retail customers calculate the price per portion (400-600 grams)

• Price is always an issue for volume buyers

• Narrow margins in supply chain despite high prices due to freight, storage and taxes

Transport Issues

• Lost original documents during shipments or improper documents

• Limited air capacity and high cost• Lack of direct scheduled air routes into

markets such as Belgium• Maintain low mortality during shipments• AquaLife ocean container transport by

Maersk

Differentiation from Maine Lobster

• Maine lobster known for poor meat fill but is cheaper, depressing markets

• Maine and Canadian product blended in shipments to reduce average price and produce acceptable overall quality

• Maine shell colour noted as too black, rusty colour is better• Need to differentiate from Maine lobster (label cartons as

“Real Canadian lobster”, “A1 Quality – 100% Canadian”• Need to build on Canada’s positive reputation at point-of-sale• Canada considered better than Maine on value, continuity of

supply, resource management, meeting specifications

Opening New Markets

• Dependence on a few small importers to develop new markets– They have to finance sales by offering credit terms– If the importer experiences business problems, it can affect the

entire supply in the market– Costly for importers to set up tank storage systems

• Are standard tanks available inexpensively from Canada?

• Market segmentation– Addition of uncooked meat

Impact of Large Retailers

• Large retailer viewpoint– Country-of-origin is not important as they buy

using specifications– Recognize quality depends on fishing season and

place of origin– Hardshell essential but they have two qualities

(hard and medium) with different sale prices– Retailer concerns– Metro retail sale price is euro 9.99/kg– Retail consumer price barrier is euro 20/kg

• Large retailers ordering great volumes feature lobster as a loss leader to generate store traffic, but depress markets for specialty seafood importers

Promotion

• Need to create a quality image to extract a premium from the market

• Lack of local promotional support by Canadian exporters– Promotional materials– Chef demos

• Origin or trade mark would be useful to add value if it comes with a real communications plan

• Provenance – tell the story of lobster and its origin

• Problem identifying product at consumption once claw elastic bands are removed– Consumer does not know where product is

from at present

Market Peaks

• Diversify selling periods from current peaks– Christmas– New Year’s– Valentine’s week– Easter– Mother’s Day– early May-June (new lobster – homard nouveau

- season in May-June)

Homard Nouveau Promotion

Large Lobsters

• Premium market exists for large lobsters– during holiday season– it is small but increasing, especially with Asian

customers

System Issues in Europe

• Fishery management practices of supplying country

• Eco-labelling

• Traceability

• Carbon footprint

• Food miles (distance a product travels to market)

• Humane shipping, holding and killing of lobsters is a looming issue for Greenpeace

• Plant standards for high risk products

Processed Lobster

3667

7

2801

2

2480

1

2627

7

1989

1757

1641

1967

05000

10000150002000025000300003500040000

2003 2004 2005 2006

Value $000Volume mt

Canadian exports of lobster in brine to the EU

VALUE $000

2003 2004 2005 20060

2000

4000

6000

8000

10000

12000

Belgium Denmark France Germany ItalyNetherlands Spain Sweden UK

Canadian exports of lobster in brine

2160

5

1227

2

1750

6

3269

720

23

895

903

2249

05000

100001500020000250003000035000

2003 2004 2005 2006

Value $000Volume mt

Canadian exports of lobster, frozen, in shell, nes to the EU

VALUE $000

2003 2004 2005 20060

2000

4000

6000

8000

10000

Belgium Denmark France Germany ItalyNetherlands Spain Sweden UK

Canadian exports of frozen lobster in shell, nes

1553

6148

4136

1187

98429709

173

0

1000

2000

3000

4000

5000

6000

7000

2003 2004 2005 2006

Value $000Volume mt

Canadian exports of frozen lobster meat, boiled to the EU

RECENT TRADE PATTERNS - VALUE $000

2003 2004 2005 20060

500

1000

1500

2000

2500

Belgium Denmark France Germany ItalyNetherlands Spain Sweden UK

Canadian exports of frozen lobster meat, boiled

VALUE US $000

2003 2004 2005 20060

5001000150020002500300035004000

Belgium Denmark France Germany ItalyNetherlands Spain Sweden UK

US exports of processed lobster

Popsicle pack

• Remain popular with consumers due to price point

• For importers, price is key as popsicle pack lobsters are very similar between processors

• Retail market can be sold out after Christmas/New Year’s, the peak season

• Importers play a key role in supplying the market after New Year’s

Market Channels

• Importers perceive a lack of respect for different trade channels• Importer must buy in May-June for the next 12 months and take the price

risk as well as financing costs for processed products which can’t be bought later

• Retailers also see product delivered too early and don’t like to pay storage costs (would prefer that exporters hold the product in Europe)

• Volume handled by importers declining as more retailers buy direct• Importer margins come from post-New Year’s sales where prices typically

rise as retail stocks are depleted• Current system discourages importers from taking any risk to grow the

market• Why do Canadians compete amongst themselves to produce the lowest

possible price for a product that the retailers need at Christmas and is only produced in one region of the world?

Market Position/Image

• Lobster is positioned as a high end luxury product in Europe

• European consumers don’t know how to eat/prepare lobster– Seen as only for white table cloth restaurants– A more mainstream approach would build volume but would it

build value?

New Product Development

• Shift away from canned lobster has helped improve the image

• Some see a need for a better presentation than popsicle pack

• Hypobaric lobster meat

• East Coast Seafood’s Paturel Brand Triple Scored Lobster Claws & Arms

Challenges

• Cadmium in lobster (limit is 0.5 mg per kg)– Violations result in an EU-wide rapid alert

• Competition from langoustes and rock lobster tails

• Greenpeace have raised concern in Austria/Germany over method of producing raw lobster tails – Greenpeace may take the issue to retailers

What can Canada do?

• Explain hard shell quality• Differentiate, for example taking advantage of the

abundant resource, provenance• Communicate about the product to consumers

– Some think lobsters are farmed• Take advantage of the sustainability of the fishery

– Maine is pursuing MSC certification which may add value if the MSC can be marketed to customers

• Work to understand the buyers’ point of view• Become better organized to address supply issues

– Set a minimum size for exports from Canada– Address storage cost concerns of buyers for processed

product– Introduce new products (e.g. tails)– Frozen raw products are viewed as higher quality– French buyers would prefer to have French-speaking

sellers

Thank you