Investment in Maine Lobster Marketing Collaborative Brings Returns to Lobstermen

The Maine Lobster Marketing Collaborative (MLMC) was created by the Maine Legislature in 2013. The Legislature’s purpose in establishing the Collaborative was clear: improve the price paid to lobstermen by marketing Maine lobster in order to increase demand. The MLMC’s activities are paid for through a surcharge on licenses held by lobstermen, lobster processors and dealers.

The MLMC's study reaffirmed the close price relationship between the Canadian and U.S. lobster fisheries. Portland Press Herald photo.

The Legislature created the MLMC because unlike other natural products, such as beef or milk, lobster does not have its own federal “check off” promotion program. Currently there are 21 federal check-off programs overseen by the USDA Agricultural Marketing Service. They are funded by mandatory assessments — an approximately 1% fee — paid by producers, handlers, or importers of the product. The money raised is used by individual promotion councils to increase demand for the specific product and to conduct research.

With a limited budget of between $1.5 and $3 million in any given year, the MLMC has focused its efforts on building demand for Maine lobster within domestic markets. Those markets include everything from high end restaurants and grocery chains to corporate food buyers and individual chefs.

Throughout the Collaborative’s 13-year history, lobstermen wondered what impact the MLMC’s efforts have made to the price they are paid for their harvests. To answer that question the MLMC undertook its first Return on Investment study this winter. A return on investment analysis looks at whether the MLMC’s efforts increased profitability for Maine lobstermen and whether increased profitability throughout the lobster industry is greater than the cost of the MLMC.

“The question of whether marketing provides a financial benefit to lobstermen came up repeatedly during the re-authorization process this winter. The Collaborative will go through the re-authorization process again in two years, and it is important to have this data for the industry and the Marine Resources Committee to consider,” said MLMC executive director Marianne LaCroix. 

According to the final report, released in April, “MLMC marketing has a positive and statistically significant impact on the Maine lobster boat price. Specifically, had there not been any MLMC marketing, the boat price would have averaged 3.3% lower than it actually was.”

The MLMC board selected Dr. Harry Kaiser from Cornell University to conduct the study. “Dr. Kaiser is a leader in the field with extensive experience in developing return on investment studies. We appreciated the way that Dr. Kaiser presented results in a clear, easy-to-understand format,” LaCroix said.

The MLMC Return on Investment study analyzed whether the Collaborative’s marketing activities increase demand for Maine lobster in the U.S. compared to what would have occurred in the absence of the MLMC and computed a return on investment for its stakeholders.

Dr. Kaiser evaluated the responsiveness of Maine lobster demand to MLMC marketing; what would the boat price have been had there not been any MLMC marketing; the gain in net revenue due to MLMC marketing compared to program costs; and the net return on investment of the MLMC to the industry.

The study concluded that “the net ROI from the MLMC over the period 2015-2024 is 8.10 and the net ROI for the latest 5 years, 2020-24, is 8.60. ”Expanding the timeline analysis to include the Maine Lobster Promotion Council (1991-2024), the net ROI was 11.59. The reason the ROI for the MLMC alone is lower than when combined with the earlier promotion council is because MLMC budgets are higher in more recent periods…” That means that each dollar invested in MLMC returned $8.10 and $8.60 respectively in net revenue to Maine lobster industry.

One factor important to the price paid at the dock was the relative value of the Canadian dollar against the U.S. dollar. “Holding all other demand drivers constant, a 10% increase in the value of the U.S. dollar relative to the Canadian dollar is associated with a 7.23% decrease in the boat price. As the U.S. dollar appreciates against the Canadian dollar, it becomes cheaper to import Canadian lobsters into the U.S. which decreases the Maine lobster boat price,” the report stated.

As a consequence, a 10% increase in lobster import volume is associated with a 7.29% decrease in the boat price.

Volume of catch of Maine lobsters is another important factor. Holding all other demand drivers constant, a 10% increase in catch volume is associated with a 5.37% decrease in the boat price. “This is consistent with the well-known 'Law of Demand,' which says that price goes down when available market supply goes up and vice versa.”

An increase in the Consumer Price Index also had a sharply negative effect on the boat price. The Consumer Price Index is a measure of the average change over time in prices paid by urban consumers for a variety of consumer goods and services. It is commonly used to calculate changes in inflation. The MLMC study found that a 10% increase in the Consumer Price Index is associated with a 19.32% decrease in the Maine lobster boat price.

“The Return on Investment report is important because it allows us to quantify the benefits of marketing Maine lobster. It should give industry members confidence that the marketing surcharge that they pay in their license fees puts more money back in their pockets,” LaCroix said.