Lobster marketing strategyIssues and options
Presentation toLobster Council of CanadaCharlottetown, July 6, 2010
By
Gardner Pinfold
Revenue Management Limited
Market Research Associates
Why we are here…
Gain common understanding of situation - factors affecting industry performance
Discuss marketing strategy -
opportunities and actions Examine marketability constraints -
challenges and options Identify next steps in the process -
what, how, when, where
Overall industry objectives
Build value throughout the value chain• Produce for highest valued markets &
market segments• Extract greater share of final product
value
The industry picture: not pretty
Revenue down by $200 million since 2006 Lobster supply up by 25% since 2003 US$ worth 40% less in 2010 vs. 2002 Global recession drives down lobster prices Wholesale prices down by 40% since 2003 Shore prices down by 35% since 2003 Industry engaged mainly in opportunistic selling Lobster has become price-volume business Industry working on narrow to negative margins
Industry revenues down 20%Atlantic Canada lobster industry revenues: 2000-2009
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Statistics Canada
CAN$
TotalLiveProcessed
Supply up 25% since 2003
Canada and U.S. lobster landings, 1990-2009
0
20,000
40,000
60,000
80,000
100,000
120,000
1990 1993 1996 1999 2002 2005 2008
Source: NMFS; DFO
tonnes
U.S.
Canada
Total
Foreign currency worth lessValue of foreign currencies vs. Canadian dollar (1997-100)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1997 1999 2001 2003 2005 2007 2009
Source: Bank of Canada
1997=100
USEUJapanUKS. Korea
U.S. $ down 40% since 2003
Export price of live lobster to U.S.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2002 2003 2004 2005 2006 2007 2008 2009
$/lbCAN$/lbUS$/lb
Source: U.S. Dept. of Commerce and Bank of Canada
Prices reflect currency shiftsLobster shore prices - Canada & U.S. (Can $)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Source: DFO, NMFS
$/lb
NS
NB
PEI
Maine
Harvester revenue 70-75% of export price
Harvester & shipper shares of U.S. wholesale price
0.001.002.003.004.005.006.007.008.009.00
10.00
1998199920002001200220032004200520062007200820092010
Source: DFO and Urner Barry
CDN$/lb for 1.25 lb lobster
Prepared by Gardner Pinfold
Harvester revenue
Shipper/distributor revenue
U.S. wholesale price
Harvesters share rises as industry revenue drops
Harvester & processor shares of U.S. wholesale price
0.00
5.00
10.00
15.00
20.00
25.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: DFO, Urner Barry, Bank of Canada, Industry
CAN$/lb wt avg for tail/CKL meat packShore price
Processor cost (shore price adjusted for 37% yield)
Processor gross margin
Distributor gross margin
U.S. wholesale price
Price sensitive to supply
Canada and U.S. lobster supply & price, 2007-2009
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Jan May Sep Jan May Sep Jan May Sep
Source: DFO, NMFS, Urner Barry
tonnes of market lobster
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
U.S. $/lb
U.S. Canada U.S. wholesale
Price (right axis)
Supply (left axis)
Export value to US declinesCanada live lobster exports to U.S.
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
CDN $
Canada frozen lobster exports to U.S.
200,000,000
250,000,000
300,000,000
350,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
CDN $
Key markets retreat from liveCanada live lobster exports by country (excl U.S.)
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Statistics Canada
CDN $
Belgium
Korea, South
France
Japan
Hong Kong
Netherlands
Spain
United Kingdom
Germany
Italy
China
United Arab Emirates
Sweden
Denmark
Wide fluctuations in frozen markets
Canada frozen lobster exports by country (excl U.S.)
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Statistics Canada
CDN $
Japan
France
United Kingdom
Germany
Spain
Italy
Belgium
Korea, South
Sweden
Hong Kong
China
Netherlands
Industry structure: wasteful & destructive competition
Competitive fishing - excessive capacity/race to maximize catch/short season/gluts/poor quality
Port market - industry structure guarantees uniform shore price regardless of quantity & quality
Insecure supply - induces investment in capacity to meet seasonal peaks and volume-driven pricing to maximize capacity utilization. Difficult to plan when supply unstable & price unknown
Industry fragmentation - shippers/processors lack market power/knowledge and bargain away margins to larger and more powerful distributors/customers
Selling not marketing - many companies diminish the value of the product by selling opportunistically out of desperation. Very few have the size and resources to market effectively.
Salmon: consolidation moves industry from volume to market driven
Global farmed salmon production and price trends, 1990-2010
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
Source: FAO and IMF
$U.S./kg
0
200
400
600
800
1,000
1,200
1,400
1,600
thousands of tonnes
Tonnes $U.S./kg
Summary of Industry Strengths and Opportunities for Creating and Extracting Value
Resource Plentiful resource = dependable supply. Effective resource management by DFO ensures dependable supply. Canada dominates the world supply of lobster – the world superpower of lobster
The inherent quality of the resource has the potential to support higher prices/margins.
Seasonal alignment with Maine maintains price and volumes
Image Lobster continues to have a premium food image among consumers despite low price cues
Canada has a positive image among international markets. International image of US is less positive
Transport New Gateway refrigerated cargo facility is the largest north of Miami, and sits next to a runway to fill a void in the Atlantic Canada supply chain.
Aqualife seafreight is a transportation option that addresses carbon footprint issues and freight cost. Effectiveness and competitiveness remain to be determined
Location Proximity to large US market – offers existing market regions that are familiar with lobster and new markets for development
Access to US is easier than other countries: no tariffs, same language and business environment
Innovation PEI Processors are working with a product development expert to identify new products
PEI government is funding product development and process efficiencies for that province. This could form the basis for inter-provincial diffusion of innovation to assist the Atlantic industry if cooperation can be developed.
Exposure Selling activity increased in 2009 to decrease inventories. Low prices increased exposure to the product for more consumers
Barriers to Creating and Extracting Value Economy Recent and current recession fear is influencing purchasing and spending at all levels of the value chain
Exchange rates have declined relative to the Canadian dollar, stripping value out of exports
Conserver economies such as the emerging middle class in China have savings rates of 38% low incomes and no social safety net , while consumer economies such as the US have savings rates of 3.6% but are not spending on luxury items due to a focus on basics
Existing Markets
Destructive internal competition is placing Canada at an extreme disadvantage in existing markets which now know that they can wait for a lower price
Low prices of Canadian lobster products displayed beside lobster from other countries, such as South America and Australia, position Canadian product as lower quality
Over-reliance on US market - more diversification needed to spread risk and create opportunity
Emerging Markets
China prefers to control the purchase, so will be focused on achieving low prices. This places Canada in the position of committing/diverting supply to a lower margin, volume opportunity
There is a long time frame to develop consumption in the emerging middle class in these markets due to low incomes, entrenched traditions and lack of distribution systems.
Competition China is a low cost lobster processor that is flooding the EU with low priced product. Against these products, Canada can expect to struggle without a clear image for quality. Low quality popsicles in the EU and low prices in Japan due to Canadians undercutting each other are positioning Canada at a POS disadvantage.
Maine is aggressively promoting its lobster domestically and internationally. Maine lobster is known internationally. Maine will attain MSC before Canada. This will provide a quality cue that will further compete with Canada
France is creating an interdisciplinary coalition of supply chain participants to supermarkets to generate more value for the industry and a marketing campaign around Buy Local’ and quality local product
Australia is actively focusing on quality branding and supply management to build demand and to support prices.
Canada is not perceived to be promoting itself sufficiently – the greater focus is on price vs quality
Barriers to Creating and Extracting Value Consumers Middle income consumers are highly price –sensitive, with high unemployment and are trading down to lower
priced food items. Food security is a dominant concern which reduces demand for ‘luxury’ foods
Local foods movements are creating a preference for foods caught or produced locally – support for local producers as well as low carbon footprint and traceability/transparency are evident.
Food Service Celebrity chefs in the US are rejecting Canadian seafood due to misinformation about the seal hunt. This issue has also arisen in the UK.
The raw lobster format is too expensive despite labor and storage advantages
Chefs see frozen lobster as lower quality than live/fresh - taste difference and image difference
Live lobster is time consuming, labor intensive and space – consuming. Mortality and shrink contribute to high margins on lobster menus. Aversion to shrink has caused potentially unsafe cooking of deads in both retail and food service
Issues among food service staff with killing lobsters
Retail Focus on margin growth vs volume - retail buyers are rewarded for increasing the margins - the related loss of volume/revenue is picked up elsewhere in the store.
Consolidation increases their power to set prices to a fragmented lobster industry
A greater focus on buying direct is causing underutilized importers to buy for re-export, with less emphasis on quality or origin.
Supermarket lobster is being used as a loss leader which entrenches a low price point - several instances where lobster is sold for less than cost during promotions
French packaging legislation is becoming more stringent with focused nutritional labeling on the front of the package and a minimum 3MM font = changes to current packaging. There is also expected to be an extension of allergy labeling+ place of origin+ major ingredients.
Possible CO2 environmental labeling data (package content, goods and impact on natural resources through lifecycle to recycling). ADEME calculations of CO2 footprints include GHG emissions at various stages - currently CO2 labeling is voluntary. Issue is that CO2 footprint can vary through seasons and storage
Barriers to Creating and Extracting Value Government Canadian governments are reluctant to propose changes, given disparate interests and the belief that change
needs to be initiated by industry. DFO takes narrow view: Industry=harvesting. Many industry participants believe the industry needs external regulation to create change. Creates a leadership vacuum and a potential stalemate to moving forward.
The value of funding for trade missions and initiatives with uncertain or unequal benefit are areas of disagreement within the industry.
Logistics Despite proximity to Halifax International Airport, Air Canada is not perceived as helpful to exporters in Canada and their foreign importers regarding scheduling, pricing or handling
Flight times out of Logan Airport (Boston) are more accommodating to the needs of food service suppliers who frequently need emergency shipments later in the day.
FedEx rates have almost doubled in the past 5 years and schedules are not flexible for emergency shipments. Pick-up from FedEx requires that all other shipments be loaded onto their trucks before lobster can be accessed, later in the morning of the following day.
Trucking lobster to USA airports requires extra time in transit as well as the time to season the lobster in water before loading them for air transit. Quality issues are a factor with the need to go through the US
Air freight rates in the US are lower than in Canada
Industry
Issues
A few large firms have the budgets to open markets and invest in product development and process development that raise the level of the industry. But, unequal cost structures cause the market leaders to be undermined, followed by the subsequent undermining of the Canadian industry in markets that force prices down due to low cost operators that enable this behavior.
The Canadian industry is fragmented creating a weakened and unbalanced trading position with powerful, consolidated customers. Low barriers to entry make make industry consolidation difficult.
Effects of fragmentation make the needed cooperation and collaboration difficult due to lack of trust, destructive competition that competes away the long term value for the industry, the perception that autonomy = control , quality inconsistencies.
Fragmentation, distrust and insecurity generate weakness and poor decision-making. “Panic to buy and panic to sell” forces prices to the bottom. Inability to plan
The industry believes it doesn’t have the ability to lead change due to real and perceived resistance to change.
Barriers to Creating and Extracting Value
Industry
Issues
Currently, an estimated 10-15% of global buyers are quality buyers. This leaves 85%-90% of buyers who are looking for the lowest price and are undermining the opportunity for higher margin sales. This erodes the focus on quality at each level of the value chain
Skepticism about the value of generic marketing
Variable provincial regulations and practices generate an uneven playing field
A price-setting mechanism will only be successful if all provinces agree to participate and a critical mass of participants is required.
Uneven relationship with DFO - industry definition focuses on harvesting; fails to recognize and address constraints imposed on shippers and processors
Succession and exit strategies at all levels are uncertain
Access to capital is constrained due to industry instability. Reinvestment capability minimal due to low margins
Lack of industry confidence in the inherent value of the resource = low resistance to privateer pricing and trade demands. Volume-driven trumps value-driven decision making.
Lack of timely information entrenches the habit of looking backwards for guidance = a backward looking supply- driven industry vs a forward looking, market-driven industry where pre-sell enables market and industry planning, and improved cost/operating controls
Low barriers to entry into processing and shipping serve to reduce the value of businesses. Consolidation for greater power is undermined by new entrants, who may have previously caused industry damage through low balling price - no consequences for irresponsible actions
Unpredictable quality in Fall fishery – issues with quality consistency within the resource and among products
Early adoption of eco-certification and traceability are an opportunity to build an image of proactivity as these will be required to enter and remain in markets, but the Canadian lobster industry’s lack of a collective commitment, confusion and conflicting views, positions the Canadian industry as a follower vs a leader.
‘Supply-security’ with accounts receivable by shippers and processors, and cash sales on the wharf add costs and negative competition.
Loyalty sells for 10 cents a pound - unstable basis for building a sustainable business model
Barriers to Creating and Extracting Value Shippers Inability to provide a timely price to customers - lost business is the result based on customer interviews
The industry norm of matching the price generated by one buyer who may be buying low volume - the lack of confidence to refuse to match- fear of being ‘cut off’.
No guarantee of supply=can’t invest in equipment, build markets, when there is no assurance of product.
Processors Inability to provide a timely price to customers - lost business results based on customer interviews
The industry norm of matching the price generated by one buyer who may be buying low volume - the lack of confidence to refuse to match - fear of being ‘cut off’.
No guarantee of supply=can’t invest in equipment, build markets, when there is no assurance of product.
Increased labour costs resulting from having to process ‘gluts’ and associated low quality, crisis processing (e.g double freezing) in order to manage the volume
Fear that growth and increased margins will attract competition reinforces survival tactics vs strategic planning. Low margins prevent reinvestment in innovation, product development and process efficiencies
Rigorous food and plant safety standards are costly…but necessary
Buyers Low barriers to entry into the industry as buyers and inconsistent entry criteria across provinces
Not all buyers are aware of the market’s ability or inability to support prices - causing unsustainable price points and perceptions of collusion to keep prices low when shippers and processors are subsequently forced to match prices to access supply
Harvesters Unaware they are capturing the largest part of the export price
Holding lobster, to await higher prices, in water that is too warm reduces quality and price potential.
Strong resistance to the subject of supply management prevents consideration of the subject. Lack of understanding of supply/demand dynamics. New season gluts have a downward impact on the value of the full season
Harvesters who are investing in quality are paid the same as harvesters who are not investing in quality - reduces incentive to be quality-focused and to make investments in quality practices
MARKETING STRATEGY
INDUSTRY MARKET- ABILITY
Strategic Options
Status Quo Balanced System
Marketing6 P’s
Market Focus
MarketabilityRACE
Marketing Only
• Develop New Markets• Branding for Recognition • Generic Marketing for Demand • Uncertain basis for supporting brand claims and demand
Retain• Fragmentation• Lack of Control• Inability to Extract Value for the Industry
• Ability to Support and Sustain Demand• Ability to Extract More Value for the Industry
Where Are We on the Marketing Ladder?
PRODUCTION FOCUS= sell what you have
SALES FOCUS = volume is the measure of success4 p’s = product, price, place and promotion
CUSTOMER FOCUS =More competition - The customer has a choice. How can WE be that choice?
5Ps- people, product, price place, positioning/promotion
STRATEGIC MARKETING FOCUS =Globalization increases competition 6Ps - people, product, price, place/channels, place/markets, positioning
What Challenges Is Marketing Facing Today?
Consumer shift driven by necessity Consumers are looking for ways to trade down without losing
quality Consumers are trading out of fresh and moving to frozen or
canned Consumers seeking value by
• Buying less per trip• Buying more frequently• Seeking deals/coupons/promotions
Consumers are buying select items to stock up on specials Consumers are changing retail formats Consumers are visiting restaurants less and supermarkets more
QuickTime™ and a decompressor
are needed to see this picture.
Source: Perishables Group 2009
Consumer Shifts Occur Over Time and Geographically Demographic Boom: 1946-1964
population explosion in Western world, increases consumption
needs and potential
Cultural Effect: 1970-2000=more freedom of choice, more
consumption, more options among more people=more
demand
Environmental Attitude Shift: 2000s,consideration of consumption effects=greater discrimination
Consumption Shifts: late 2000s, more meaning, more discrimination re
consumption in NA and EU (BUY LESS,BUY BETTER)
Economic-demographic shifts in China and India: 2000s, emerging
middle –class, more
consumption, similar to Western world 10-40 years ago (BUY MORE, BUY DIFFERENT
Global Economic Recession; late
2000s, new normal and new
normalizer for all countries (BUY LESS, BUY HIGHER VALUE)
There will be a need to BALANCE emerging Consumer economies with existing
Conserver economies
Marketing Objective: Balancing the Moving Parts That Connect the Industry and the Market
Supply
Demand
Quality
Price Generate Stability
Manage Consistency
Cooperation Competition
INDUSTRY MARKETABILITY
MARKETING STRATEGY
The Impacts of Unbalanced Marketing and Market-ability
AUSTRALIAN MARKETING STRATEGY
INDUSTRY MARKETABILITY
Australia focuses on brandingand supply management
Australian tails sell for $45.99 pound in
USA and Japan
MAINE MARKETING STRATEGY
INDUSTRY MARKETABILITY
Maine lobster is actively branded and meat is selling at $29.99/pound in USA.
But lack of consistency in India, for example, has eroded
their position. Domesticstrength and export
weakness.
CANADIAN MARKETING STRATEGY
INDUSTRY MARKETABILITY
Canadian lobster is selling in Japan lower than
wholesale. EU marketswait for lowest prices to be offered. US says Canada
is the world lobster Superpower………..
Marketing Strategy Building Blocks
People
Strategy
Product Strategy
Pricing
Strategy
PositioningStrategy
Place/Markets
Strategy Place/Channels
Strategy
Marketing is a System of Strategic Decisions and Priorities
Marketing Options
People
Strategy
Affluent 10% x 4+/year(premium, lower price Sensitivity)
Middle Class Mainstream X 1/year(price/commoditybuyers, high price sensitivity )
Product Strategy
Canners v Markets
% Live v Frozen v Prepared
% Same v New
Pricing
Strategy
% Marketing for a Premium v Selling for Volume
Positioning&
Communication Strategy
Place/Markets
Strategy
% Existing v Emerging Markets
% Effort on Rescue v New DevelopmentMarkets
% Retail v Food Service Messages•Canada Brand •Generic • Health•Portion Sizes•Convenience•News
Media •Social/digital•Print.•Electronic•POS•Packaging
Targets•Industry•Trade• Consumers
Value Chain Control
Place/Channels
Strategy
Multi-channeling
Logistics
Quality Grading
Relational v TransactionalSelling
Price maker vprice taker status
Long termv short term thinking
Innovation v Invention
Effective Marketing Strategystarts with Market-Ability
PRODUCT
PRICE
PEOPLE
POSITIONING
PLACE/MARKETS PLACE/CHANNELS
INDUSTRY MARKET-ABILITY R
AC
E
Marketing Actions= RACEActions that answer the Question:
What do we need to DO differentlyto leverage strengths, minimize weaknesses, create opportunities and eliminate barriers?
REDUCE•Redirect•Decrease •Minimize
Weaknesses
ADD•Expand
• Increase• Enhance
Strengths
CREATE •Re-create •Develop New•Start
Opportunities
ELIMINATE • Remove• Stop • Terminate
Barriers
Reduce Add Create Eliminate People
Positioning
Price
Product
Place
/Channels
Place
/Markets
Weaknesses Strengths Opportunities Barriers d d d
Putting It All Together
Reduce
Weaknesses
Add to Strengths
Create
Opportunities
Eliminate
Barriers
People•Harvesters•Buyers•Processors•Shippers•Customers•Consumers
Narrow the focus on the struggling middle class target market – the low
price, low margin market
Increase focus on High $ Target Market to take the focus
off price as a barrier.
Focus on informing all harvesters about costs in the
industry beyond the wharf and the connection between
controlling consistency of quality and supply, in order to
build stability of price and demand
Create effective and transparent industry
information dissemination channels (vertical and horizontal) to support
understanding, trust and cooperation.
Eliminate negative perceptions that undermine trust (such as conspiracy
theories) with transparency
Eliminate inconsistent lobster handling practices
with education
Positioning Reduce opportunities for misinformed news issues, such as sealing, that arise
in the absence of alternative imagery and knowledge of Canada.
Reverse the slide into commodity status with a
quality focus
Reduce the current quantity focus that
defines the Canadian lobster sales model
Add a strong quality focus that will redefine the Canadian
position and product in the marketplace
Add Quality options- Canada Gold and Silver (aspirational and accessible), to clarify the
difference between price points and to position for quality
pricing
Add new communication channels (social media) to
introduce and support branding.
Create generic consumer –focused marketing, to generate demand for
quality that ‘pulls’ quality through the industry from
wharf to shelf (Pull marketing)
Create a compelling value proposition that drives
more consumers to ask for and about quality
distinctions
Create an ‘open for business’ climate in the
industry
Eliminate Canada’s country/supplier anonymity with a clear commitment to
traceability
Reduce
Weaknesses
Add to
Strengths
Create
Opportunities
Eliminate
Barriers
Price Reduce focus on transactional, low margin
volume selling,
Reduce price volatility which causes retailers and
food service to de-list
Increase relational selling, marketing for a premium.
throughout the supply chain
This is a focus on increasing margins to enable re-
investment and build a sustainable ROI
Increase speed of price provision to buyers to
increase capacity to plan
Build and implement a price-setting mechanism focused on quality, stability, efficiency and
unity.
Include an industry- minimum price mechanism as a base for incremental quality to incent
harvesters
to uniform quality practices.
Eliminate price-taker status, Price Matching Undercutting,
Counter-productive competition,
Short term focus
Product Reduce supply to support higher prices and rebuild from commodity status –
then manage supply to the markets developed .
Reduce the supply of low quality products that are
negative cues for processed.
Reduce the tendency to oversupply a product that ‘works’ to avoid flooding
Reduce the incidence of inconsistent quality product
from Canada that
sets the stage for low pricing.
Match processing capacity to the catch through
consolidation (reduces OH and labor supply costs)
Increase consumer exposure with new lobster products to
increase choice and frequency.
Increase the distinction between canners and
markets to create two clear products and price points,
and to leverage that
Canners are uniquely Canadian- smaller, good
quality and taste.
Build an innovation vs invention focus - collaborate on value added
formats to diversify risks and costs.
Focus on both in-shell product development, and meat products,
such as claws /knuckles.
Work with McCains or other value-added companies to develop
the next ‘chicken wing’ product using lobster
Create a live and processed product deployment plan that
aligns with market goals•Less live to existing markets to increase price• divert live to new markets to generate interest (Asia)•develop processed, convenience formats for existing markets already familiar with lobster
Eliminate product –origin confusion with packaging and live product markings.
Eliminate gluts that affect prices through out the
season, increase costs and threaten quality
Eliminate competitive fishing that drives up
harvesting costs and results in unpredictable supply
Reduce
Weaknesses
Add to Strengths
Create
Opportunities
Eliminate
Barriers Place
/Channels
Reduce reliance on powerful buyers by
expanding the customer network
Add new value chain strategies to increase control,
generate new growth areas and options for extracting
more value :
Digital channels
Value chain control, work-arounds
Multi—channeling
Commit to disciplined cooperation to create a dominant market presence consistent with
Canada’s dominant supply status.
Another term for this is ‘connected autonomy’ that recognizes
separate entities working together on selected initiatives
Eliminate channel weakness resulting from industry
fragmentation and negative competition
Place
/Markets
Temporarily redirect supply from low value markets to rebuild quality image and
demand
Add emerging markets
Add new regions in existing markets (second tier) for a balanced market portfolio
Focus on selected markets to build depth
Eliminate jumping from market to market
Where To Start?
Marketing Options
People
Strategy
Affluent 10% x 4+/year(premium, lower price Sensitivity)
Middle Class Mainstream X 1/year(price/commoditybuyers, high price sensitivity )
Product Strategy
Canners v Markets
% Live v Frozen v Prepared
% Same v New Products
Pricing
Strategy
% Marketing for a Premium v Selling for Volume
Positioning&
Communication Strategy
Place/Markets
Strategy
% Existing v Emerging Markets
% Effort on Rescue v New DevelopmentMarkets
% Retail v Food Service Messages•Canada Brand •Generic • Health•Portion Sizes•Convenience•News
Media •Social/digital•Print.•Electronic•POS•Packaging
Targets•Industry•Trade• Consumers
Value Chain Control
Place/Channels
Strategy
Multi-channeling
Logistics
Quality Grading
Relational v TransactionalSelling
Price maker vprice taker status
Long termv short term thinking
Innovation v Invention
Barrier #1 - nothing that matters is predictable Supply
• Size, timing and quality of landings are unknown and impossible to predict with current management
• Competitive fishing creates pressure to maximize catch leading to short seasons, gluts, poor quality
• Shippers/processors have no supply security; difficult to develop production plans to respond to customer needs
Price• Shore price set after season starts reflects market power of
distributors & customers • Industry structure results in race to the top at the wharf and race to
the bottom in the market• Price rules in the market because lobster is a commodity and
players are volume sellers
Barrier #2: Industry structure creates/reinforces Barrier #1
Harvesting: excess capacity & competitive fishing result in high volumes & short seasons
Shipping: ease of entry intensifies shore competition & nullifies effectiveness of price to influence quality & quantity
Processing: over-capacity creates pressure to cover overheads, driving volume buying and forcing up shore prices
Shippers and processors: volume-driven sellers prone to undercutting to meet cash flow needs
Volume focus intensifies competitive environment and undermines investment in market development
Industry fragmentation: many sellers with volume focus and limited knowledge mean distributors and customers rule the market and extract the value
Where to start? Marketability is the foundation of marketing
Barrier 1 options Supply (quantity/quality)
• Lower trap limits• Trip limits• Quotas (IQ)• Fleet rationalization (ITQ)• Adjust season (quality)
Price (shore)• Negotiate (CB)• Arbitrate (FO)• Collaborate • Formula (PM)• Auction
Barrier 2 options Harvesting capacity: provide fleets
with the tools to adjust Shipping: develop/impose stringent
quality standards. Regulate entry. Processing: eliminate all direct &
indirect financial support to plants. Restrict entry.
Industry fragmentation: allow vertical integration; provide a basis for consolidation; collaborative/joint marketing to limit destructive competition.
Do nothing: let the Barrier 1 options take effect.