WSJ article about glut of lobsters, due to lack of expected Y2K celebrations.
December 28, 1999
Y2 Many Lobsters? Most Revelers
At Millennium Have Turned Tail
By ALEC KLEIN and DANIEL GOLDEN
Staff Reporters of THE WALL STREET JOURNAL
BOSTON -- James Hook had long dreamed of a millennial New Year's Eve
with a lobster in every pot.
Mr. Hook, whose family owns James Hook & Co., a big purveyor of lobsters
in Boston, filled his tanks early to prepare for the expected New Year's spike in
demand. Hook & Co. hoped to move 1.5 million pounds of the sea creatures
this month, 50% more than in December last year.
But with lukewarm interest from customers, Mr. Hook has sold less than
400,000 pounds so far this month. He figures he may top out at 800,000
pounds. He is worried that the tens of thousands of lobsters that now cram his
tanks will soon resort to cannibalism. "If we don't move them fast, they'll start
chewing each other," Mr. Hook says.
Claws for Alarm
To the growing list of those who mistakenly bet that a millennium-fueled,
party-down frenzy would drive up prices for everything from hotel rooms to
champagne to New Year's noisemakers, add the lobster hoarders.
Wholesalers and other dealers in New England and Canada are trying to unload
tons of lobsters they began stockpiling in the spring for New Year's. Lobster is
a traditional year-end holiday indulgence among the well-heeled, but many
figured that the once-in-a-lifetime year 2000 blowout would have middle-class
consumers storming supermarket lobster tanks.
The enthusiasm pushed up lobster prices earlier in the year. But with just days
left until the ball drops, demand for celebratory crustaceans is about as cool as
the Maine coast. Lobster prices normally rise at year end because of high
demand and reduced catches. This year, they are dropping.
At the Union Oyster House, a renowned Boston
restaurant, owner Joseph A. Milano says
wholesalers have cut their prices for fresh
lobsters by about 12% in the past month to the
current rate of about $5.25 a pound. Last year
at the same time, prices increased about 4% to
similar levels. Mr. Milano, who had expected
an increase this year, calls the sudden drop
"awfully strange."
Nova Scotia seafood broker Michael Zinck cut
prices for frozen lobster meat as much as 75
cents to about $10 a pound a few weeks back.
The New Year's bonanza that brokers had
hoped for, says Mr. Zinck, has "come to a screeching halt."
The glut began developing last spring, when lobster-processing companies,
which freeze lobster to sell to hotels, restaurant chains, supermarkets and
cruise ships, bought a larger share of the catch than usual. In Maine,
processing companies increased their purchases by about 25%, to about half of
the state's lobster catch.
Even before Y2K entered the picture, frozen lobster meat had been growing in
popularity. In addition, new production techniques have made it possible to
freeze a whole lobster in a brine-filled plastic sleeve -- dubbed a "Popsicle
Pack" by one wholesaler -- that suppliers swear is nearly as tasty as fresh
seafood.
Counting on high New Year's demand, Alliant Foodservice Inc., a Deerfield,
Ill., food distributor, increased its purchases of frozen lobsters by about 20%
this year. But Alliant still has "millions of dollars" of inventory remaining, says
Jim Burhop, a seafood purchasing manager, adding: "I thought there would be
shortages and the market would go up."
The overabundance means some suppliers may be caught in a trap. Lobsters
can sit in subzero freezers for only about a year. After that, the meat
dehydrates and loses some of its taste. The aged seafood is either thrown out
or recycled into low-brow soups, stir-fry dishes or seafood salads, says an
Alliant official.
One company stuck with an oversupply of the bottom-feeders is Slade Gorton
& Co., a Boston distributor. On a recent day, as forklift operators shuttle boxes
of frozen lobsters around the firm's 50,000-square-foot frigid warehouse,
seafood buyer Peter Hicks says the company expected an end-of-year sales lift
that hasn't yet come. Inventory, he acknowledges, is 30% higher than last
year.
Mr. Hicks blames the slowdown on "greedy" restaurants that overcharged for
New Year's Eve dinners -- many of which feature exotic lobster dishes. He
believes many revelers are experiencing sticker shock, and have decided to stay
home.
Indeed, the Market Square Bistro, a Bainbridge, Ohio, restaurant, had planned
to buy about 30 live lobsters as part of a 10-course, $200-a-plate dinner.
Owner Michael Longo says the extravaganza included a course featuring
lobster pancakes. But Mr. Longo recently canceled the celebration because
customers were reluctant to shell out all that money. "It's not going to be a
huge party night," says Mr. Longo, who will instead serve from his regular
menu on New Year's Eve.
Further evidence for the price backlash theory crops up at places like a Costco
wholesale club in Waltham, Mass. One recent day, shoppers there are
snatching up frozen crab claws, prawns and red king-crab legs, but few people
are interested in the much more expensive lobster tails, says Bill Walsh, who
mans the seafood counter. Mr. Walsh says he has sold 16 lobster tails in four
hours, compared to hundreds of the other, less-expensive seafood treats.
Brian Grossman, a 25-year-old Costco shopper, says he considered buying
lobster for the New Year's party he is co-hosting. But Mr. Grossman, an
attorney in Haverhill, Mass., instead opted for Swedish meatballs and potato
puffs. This year "is going to be more low-key than last year," he says.
Some wholesalers, sensing disaster, have hedged their bets. Last month,
Trisome Foods Inc., Stratham, N.H., spent roughly $23,000 buying receivables
insurance to cover about $20 million in lobster sales. The insurance protects
the company against customers who don't pay up. Trisome co-owner David
Wade says he bought the insurance -- the first time the company has ever done
so -- because of fear that Y2K lobster "hype" isn't panning out. "It's a gut
feeling," Mr. Wade says.
Others say they may soon have to face up to their worst-case scenarios. Bill
Demmond, a vice president at big Atlanta-based wholesaler Inland Seafood
Inc., says his company has already shaved the price it charges retailers for a
lobster tail to about $17.50, from $26 in November. He's looking at next
month's Super Bowl and Easter as possible outlets. If things get really
desperate, he could sell some as "feed for prisoners," he says. But if he can't
find people to eat all of Inland's lobster, there's one more option.
"Raw lobster bait," Mr. Demmond says. "Lobsters are cannibals. They will eat
each other."
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