Today’s Lobster Market
“Up in Maine, lobsters are thriving…. Down the coast, however, the story is different. In southern New England, lobster stocks have plummeted to the lowest levels ever recorded, putting many lobstermen out of business” – The New York Times8
The trend towards declining lobsters in southern waters is ominous. And climate change, is likely to blame.
Climate Change Threatens the Future of the Lobster Market
Climate change has a significant effect on oceans: over the last 100 years, ocean temperatures have risen by about 1.3°F. For many species sensitive to rising ocean temperatures, this trend may ultimately prove deadly.7
And, lobsters happen to be one of those species.
Climate change is closely “associated with the success of lobster recruitment in the Gulf of Maine.” 2 Data suggests that there exists “an optimal thermal condition… for some limiting stage in the life cycle of the lobster and [that] enhanced recruitment follows this optimum up and down the coast with each climatic oscillation.” 2 And, there seems to be a temperature threshold above which “natality or survival during early life history stages” is acutely threatened.1
High temperatures that remain below the threshold “may be speeding up their metabolism, leading to the population boom.” But, once the threshold is crossed, the lobsters are unable to survive.8
In water 5°F warmer than current conditions, lobster larva “struggle to survive.” And, the United Nations’ Intergovernmental Panel on Climate Change expects the Gulf of Maine’s temperature to increase by 5°F in 2100.9
Therefore, climate change poses a significant threat to Luke’s Lobster and other Maine-style lobster restaurants.
Luke’s Lobster Overview
Founded in 2008
Mission: Serve traceable sustainable Maine-style seafood to guests around the country
Early Success: $20.9 million sales in 2015, projected to reach $42 million in 2018. 19 Luke’s Lobster restaurants, with plans to expand to nearly 60 restaurants by 2020.3
Concept: Keep stores minimal, take orders at the counter to reduce overhead, serve high volume seafood to enable low margins, and “offer a product that is so fresh it doesn’t seem like fast food.”4
Strategy: Complete vertical integration, providing complete “ocean to table” service.3
Control Through Vertical Integration
Vertical integration enables Luke’s Lobster to better control the following:
- Origin: Luke’s Lobster can track where and how lobsters are caught
- Quality: Luke’s Lobster can ensure lobster freshness
- Cost: Luke’s Lobster can be independent of suppliers who can charge a fluctuating price for lobster
- Sustainability: Luke’s Lobster can monitor and manage sustainability practices intended to improve overall lobster yield
Sustainability in Action
Luke’s Lobster is dedicated to sustainability; it is central to their mission.
“Preserving our fisheries will forever remain at the core of our business…. We all must play an active role in ensuring our oceans continue to exist as a key source of food and livelihood for people all over the world.” – Luke’s Lobster5
Sustainability is enabled through vertical integration.
Luke’s Lobster has ownership stake in a co-op of trusted Maine fishermen and ownership of the lobster processing plant that readies lobsters for sale at restaurants – “there’s no middleman in [the] whole chain.”3
Having ownership of known and trusted fishermen allows Luke’s Lobster to support and control sustainability practices. Without having strengthened control over the entire supply chain through vertical integration, initiatives taken to address the sustainability issues plaguing the lobster industry would likely be less successful.
Additional Steps Luke’s Lobster Should Consider Implementing
- Communicate sustainability “best practices” and spread the effort across the community
- Collaborate with other lobstering companies
- Potentially partner with local government and activist organizations
- Devise other ways to improve the survival of baby lobsters once they hatch. One way might be to raise baby lobsters in a controlled environment and release them into the ocean after they have had time to appropriately develop
Unfortunately, if the trend of rising ocean temperature continues as predicted, Luke’s Lobster will need to brace for impact. If Luke’s Lobster cannot find a way to improve the survival of baby lobsters, lobsters will become increasingly scarce, and Luke’s Lobster’s model of supplying (fresh) fast food to the masses will no longer make sense.
1. Fogarty, M. (1988). Time Series Models of Main Lobster Fishery: The Effect of Temperature. Retrieved from: http://www.nrcresearchpress.com.ezp-prod1.hul.harvard.edu/doi/pdf/10.1139/f88-137
- Haring, G, Drinkwater, K. & Vaas, W. (April 2011). Factors Influencing the Size of American Lobster (Homarus americanus) Stocks Along the Atlantic Coast of Nova Scocia, Gulf of St. Lawrence, and Gulf of Maine: A New Synthesis. Retrieved from: http://www.nrcresearchpress.com.ezp-prod1.hul.harvard.edu/doi/abs/10.1139/f83-027#.WBwKhvkrLZt
- Morrissey, J. (Aug. 2016). A Restaurant’s Sales Pitch: Know Your Lobster. Retrieved from: http://www.nytimes.com/2016/08/25/business/smallbusiness/lukes-lobster-restaurants-coops-seafood.html
- Quittner, J. (2013). The Little Lobster Sandwich That Could. Retrieved from: http://www.inc.com/30under30/jeremy-quittner/lukes-lobster-luke-holden-ben-conniff-2013.html
- Company Website. Retrieved from: http://www.lukeslobster.com/
- HBS Business and Environment Initiative, “Climate Change 101”
- Henderson, R., Reinert, S., Dekhtyar, P., & Migdal, A (Oct. 2016). Climate Change in 2016: Implications for Business (317032)
- Zimmer, C. (Sept. 2015). Retrieved from: http://www.nytimes.com/2015/09/08/science/warming-oceans-putting-marine-life-in-a-blender.html
- Associated Press (Sept. 2016). Retrieved from: https://www.theguardian.com/environment/2016/sep/24/lobsters-climate-change-oceans-marine-life-seafood-research