Paul Adams for the Toronto Star
Case Studies

Can Chinese customers cotton to Canadian claws? Nova Scotia’s Tangier Lobster looks East as U.S. sales slump

VITAL STATS
Contact:
(902) 772-2130
Type of Company:
Live lobster exporter
Mission Statement:
Premium quality lobster from the North Atlantic
Number of Employees:
14 to 22
History:
Shipped approximately 2.4 million pounds of lobster in 2011.

All the best attributes of Nova Scotia lobster are, paradoxically, the very same things that make it expensive — and challenging to sell.

“Nova Scotia hard shell is a premium quality lobster,” says Stewart Lamont, managing director of Tangier Lobster Company Limited, an exporter based in Nova Scotia. “It is well-meated, it is hardy. It has high blood protein.”

In other words, it’s delicious.

And deliciousness doesn’t come cheap, so Tangier needs buyers willing to pay a premium price. Before the recession, Nova Scotia lobster exporters could rely on the U.S. market to wolf down a sizeable share of their annual output. Now, Tangier’s American sales are down, and the company is looking to make up the difference in Asia — particularly in the massive market emerging in China.

But that market is far from automatic. Shipping cross-continents isn’t simple, but more importantly, the Chinese have been educated in a very different kind of crustacean — Australian rock lobster — which makes them wary of the North American product.

Rock lobsters don’t have claws, so their Canadian cousins simply look bizarre. This makes marketing a challenge, and means China won’t support the high prices required to turn a profit. At least not yet.

Lamont says Tangier is already battling to bring change.

“We have, in the course of the last three years, tripled our sales in Asia generally,” he says.

That trend stretches across the industry. According to numbers provided by the Lobster Council of Canada, Canadian exporters sold about $27.5 million worth of lobster to China in 2011. That’s a tiny slice of that year’s $1 billion in worldwide lobster exports. But the number is impressive considering that, in 2007, China bought only $1.6 million worth of lobster from Canada. Five years out, the Chinese market is more than seventeen times its former size.

By contrast, the U.S. market has remained stagnant. Even though American importers still buy more Canadian-exported lobster than all other countries combined, U.S. sales figures haven’t moved much over the past decade. Data from Statistics Canada show exports consistently hovering around the $700 to $850 million range since 2001.

The recession and weak U.S. dollar aren’t helping matters, and those factors have made the current situation especially difficult for the Nova Scotia company, which employs anywhere from 14 to 22 staff, depending on the season.

Tangier was founded in 2010 when its owner bought the assets of another well-established Nova Scotia lobster exporter. Prior to 2008, Lamont says, a favourable exchange rate made selling to the U.S. easy. Now, with Canadian and U.S. currencies at virtual parity, things have changed.

“The American market was our best market, for obvious reasons,” says Lamont, adding that it was easy to ship live lobster to nearby population centres such as New York and Los Angeles.

The US, which formerly represented up to 31 per cent of sales, now only accounts for 19 to 21 per cent. The company hopes to make up that difference in Asia.

The Chinese market is particularly tempting because buyers there have demonstrated a willingness to spend on quality lobster. The country’s burgeoning middle class is quickly developing a taste for luxury, so importers can afford to pay the higher prices Tangier needs.

But cracking the market isn’t as simple as swooping in with crates of crustaceans and putting up a “for sale” sign. There are a variety of logistical and cultural factors that complicate matters.

The delivery process, for one, is problematic. Lobster needs to arrive alive.

“You’ve gotta have a product that will survive two days out of water in a box,” says Geoff Irvine, executive director of the Lobster Council of Canada. “That’s a huge risk.”

And sometimes airfreight providers aren’t reliable. Lamont says Tangier can generally get lobsters to any point on the globe within 46 hours, but even he admits that slip-ups happen. If a crate doesn’t make its flight, it needs to be refrigerated at the airport until alternative arrangements can be made. If it sits around for too long, the cargo may die.

Then there’s the cultural factor, which is problematic, since North American lobsters look so strange to Chinese consumers.

Still, Australia has been producing less and less of its popular rock lobster in recent years due to a population decline that isn’t fully understood, but may have been caused by a combination of overfishing and environmental factors, such as changes in seasonal ocean currents. The country’s exports have been suffering accordingly, meaning some demand is likely being left unmet. In order to capitalize on that gap, Tangier and its ilk need to convince Chinese diners unfamiliar with lobster claws that the jagged, splotchy red appendages hold the quality meat they demand.

How do you make people crave something they’ve never tasted? Canadian lobster interests believe the answer lies in targeted marketing.

“Provinces (in Atlantic Canada) have funded some Chinese cooking shows, where they have celebrity chefs show people what to do with the claws,” says Irvine. Maritime governments have also sponsored trade missions to and from China, and educated the chefs at exclusive Chinese restaurants and hotels in how to cook lobster.

The locals, says Irvine, are actually, “getting used to it quite quickly.”

Despite these efforts, overcoming the new market’s difficulties won’t be easy, but Tangier does have one immutable law of the universe on its side — Canadian lobster will always taste good, regardless of what its claws and other appendages look like. The challenge will be getting diners to make the switch, and pay the right price for the pleasure.

EXPERT VIEWS

As Interviewed by: Premium quality lobster from the North Atlantic

There’s a growing middle class in China with a real inclination to experience new things, so this opportunity is very lucrative. Plus. Tangier is in a great position to capitalize on the demand because it already has lots of experience developing international markets. That said, the language, logistics and cultural differences are challenging, but the company has a lot of options. It’s probably worth partnering with other exporters and the Canadian government to increase demand through marketing, and to invest in research to make the logistics of exporting live products overseas more stable. It will also be important to connect with a distributor that understands the local market, and building a lobster pound in China — basically a holding tank for live lobster — may be worthwhile. That way Tangier can ship larger volumes and continue to build demand, without excess product spoiling. And, finally, the company should look into selling lobster meat, as opposed to just live lobster. Shipping processed lobster is much easier than moving live crustaceans, and, if diners don't see the entire animal, they won't have any opportunity to balk at unfamiliar appendages.

by Peter Conrod

Part of Tangier’s problem can be solved with better logistics management. Mobile to mobile technology really presents an opportunity — they can use it to track, in real time, the temperature of cargo to ensure their lobsters make it across seas alive. And a strong international web presence will also be important, although this can be difficult to achieve when you don’t know a local market well. So the company is lucky to be in a country as multicultural as Canada. There are firms they can use, most are concentrated in Toronto and Vancouver, that have a deep understanding of the Chinese culture and specialize in developing effective online strategies to tap target markets across countries. But it may actually be worthwhile to have someone on the ground locally. This is actually relatively easy and affordable to do thanks to today’s collaboration and cloud sharing technology. The company can open a remote office staffed by locals who understand the market, and leverage them to find partners, grow relationships, and develop a marketing strategy based around messaging that really resonates with the local culture.

by Tisha Rattos

Tangier is in a great position, but there are some strategies they can employ to make the move into China easier. First, Chinese consumers are not homogeneous, so the company really needs to know who they're going after and what their purchase motivation is. It’s critical to conduct focus groups and other market research in China — using Chinese nationals in Canada won't cut it — to get more information about these issues. Also, Tangier should remember that many Asian consumers are concerned with gaining prestige through the public perception of their purchases. The price-quality association there is very important. Finally, in China, many products are consumed for their perceived health benefits. The unfamiliar large claws could become a marketing advantage with a message like, 'Canadian lobsters are strong, they have big strong claws, eat them and you can be strong, too.' If they can get celebrities, such as athletes, to promote the product as having this benefit, and also use samples and special promotions to get lobsters on the menus of exclusive restaurants, they'll likely see a significant increase in purchases by their target market.

by Jane Lee Saber

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