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May 4, 2015

Exports boost lobster: Demand from Asia boosting sales at York shellfish dealer

Photo / Tim Greenway
Photo / Tim Greenway
Tom Adams, owner of Maine Coast Shellfish LLC, has built a $40 million business in four years by focusing on international markets for Maine lobsters. His York business has 25 full-time employees.

Maine Coast Shellfish LLC

15 Hannaford Drive, York

Founded: 2011

Founder, owner and CEO: Tom Adams

Services: Worldwide distributor of lobsters, clams, mussels, oysters and periwinkles.

Sales: $40 million in 2014

Employees: 25 full-time

Contact: 207-363-0876

www.mainecoastcompany.com

SBA loan programs for exporters

For businesses looking to get into exporting, there are three Small Business Administration loan programs that can help.

1. Export Express loan program

Offers financing up to $500,000. It is the simplest export loan product offered by the SBA and allows participating lenders to use their own forms and procedures. The SBA determines eligibility and provides loan approval in 36 hours or less.

Eligibility: Any business that has been in operation, although not necessarily in exporting, for at least 12 full months. Must demonstrate loan proceeds will support export activity.

Use of proceeds: May be used for business purposes that will enhance a company's export development. Export Express can take the form of a term loan or a revolving line of credit.

2. Export Working Capital program

Provides up to $5 million for export transactions. This loan has a low guaranty fee and quick processing time.

Eligibility: Contact the business's local lender to see if it is approved to underwrite Export Working Capital loans.

Use of proceeds: One, financing for suppliers, inventory, work in progress or production of export goods or services; two, working capital to support foreign accounts receivable during long payment cycles; and three, financing for stand-by letters of credit used as bid or performance bonds or as down payment guarantees.

3. International Trade Loan program

The International Trade Loan offers loans up to $5 million for fixed assets and working capital.

Eligibility: Available if the small business is in a position to expand existing export markets or develop new export markets. Also available if the small business has been adversely affected by import competition.

Use of proceeds: The borrower may use loan proceeds to acquire, construct, renovate, modernize, improve or expand facilities and equipment to be used domestically to produce goods or services related to international trade.

For more information

Marilyn Geroux, the U.S. Small Business Administration's district director for Maine, urges businesses to contact John Joyce, regional director of international trade programs at the U.S. Export Assistance Center for New England, at 617-565-4305 or John.Joyce@sba.gov.

Source: U.S. Small Business Administration, Maine district office

Seafood was Maine's leading export in 2014, with its total value of $456.67 million topping the No. 2 export commodity of paper and pulp products by almost $100 million. And the biggest driver of seafood's rise to the top of the state's export commodity chart, says Jeffrey Bennett of the Maine International Trade Center, is that tasty two-clawed crustacean harvested by hundreds of independent fishermen in the Gulf of Maine, the Maine lobster.

Lobster accounts for almost $366 million of those exports and its overall total export value increased by a whopping 45.4% between 2013 and 2014 among the 25 countries buying Maine lobsters, according to statistics compiled by the U.S. Census Bureau's foreign trade division.

"That's pretty significant for the industry," says Bennett, MITC's senior trade specialist who was part of a Maine delegation touting the state's iconic lobster and other seafood products at the world's largest seafood show in Brussels in late April. "We've seen huge growth in Asia."

To prove Bennett's point, one could start off by visiting Tom Adams at his four-year-old Maine Coast Shellfish distribution and processing plant in York. Located less than two miles from Exit 7 on the Maine Turnpike, the 16,000-square-foot plant features four holding tanks capable of storing up to 150,000 pounds of live lobster in circulated, filtered and chilled natural ocean water. There's an atmosphere of friendly efficiency, as workers wearing rubber gloves and overalls hoist totes of lobsters out of the tanks, sort them by weight in a climate-controlled warehouse and pack them tightly in waterproof boxes for daily shipments out of airports in Boston, New York and Newark, N.J.

"I want to be a major shipper of lobster worldwide," says Adams, who also attended the Brussels trade show. "To grow as quickly as I could, I went after the emerging Asia market."

Maine Coast Shellfish's sales have grown from zero to $40 million in four years, earning Adams the accolade as the U.S. Small Business Administration's 2015 Small Business Exporter of the Year for Maine. He'll be honored at an SBA reception at the Augusta Country Club on May 5. Ready Seafood, a Portland-based lobster dealer and processor started 10 years ago by John and Brendan Ready, is receiving a similar award from the Maine International Trade Center on May 21 for its growing global seafood business, with international markets now accounting for more than 70% of its business. Both companies are playing a significant role in expanding markets for Maine's lobsters, helping to drive a record one-year increase of almost $87 million in the overall value of the 2014 catch over 2013.

"In the last year, the value of lobster per pound went up 79 cents," Adams says. "That's dramatic. At $3.63 per pound, that's a 20% higher value than the year before."

Emerging markets

Adams, 45, started his company in 2011 with the vision of focusing on international sales. The market in Asia, at that point, was just emerging — with China, for example, importing a bit more than $100,000 worth of Maine lobsters in 2010, according to the U.S. Census Bureau's foreign trade division. In 2014, with $21.5 million in sales, China is the No. 2 importer of Maine lobsters after Canada, at $300.5 million.

Although Adams knew the European market would be an important segment of his overall business, he quickly realized Asia had stronger growth potential. In a mature market, he says, Maine Coast Shellfish would have to take away market share from someone else; in an emerging market, the future was wide open.

"The bulk of the industry was just starting to see a market develop in Asia and mainland China," Adams says. "I knew I needed to find customers in those new emerging markets."

Although his company is technically a start-up, Adams has more than paid his dues: He's a 30-year veteran of Maine's shellfish industry.

"I pretty much had just had one job before starting this business," he says, noting that he began working for a York lobster dealer when he was 15 and eventually became a 50% owner of that company by the time he hit 30. Although things were going well at that business, Adams says that by 2009 he decided it was time to take a different path and sold his half of the business.

He spent almost two years carefully planning his re-entry into the lobster distribution business. From the beginning, he was thinking big. Typically, he says, new lobster dealers start small, building facilities capable of holding 20,000 to 30,000 pounds of lobsters at a time. His plans called for retrofitting an existing industrial facility in York and installing holding tanks with a capacity of 150,000 pounds. The first bank he went to, he says, turned him down, saying, "This is pretty large for a start-up."

Adams says he eventually found a willing lender in Bangor Savings Bank, which, in 2011 and every year since, has been the top SBA lender in Maine. Acknowledging that both the bank and SBA put his business plan through a rigorous review process, Adams says he recognized "they asked the right questions."

"They wanted me to cross every 'T' and dot every 'I,'" he says. "It took longer [to close the loan], but I felt it was worth my time to make sure everything we did was right."

Adams says he resisted locating in nearby New Hampshire — with no income or sales taxes and closer proximity to international airports — for a very simple reason. "I chose to stay in Maine because I wanted to say I was a 'Maine' lobster company," he says. "Aside from the fact that my family has lived in Maine for many generations, my marketing effort from the start has been based on the fact that I am a Maine lobster business."

He also knew, from the start, that investing heavily in marketing was important.

"I wanted to get name recognition very quickly and worldwide," he says. "We're spending well over $100,000 in marketing and advertising. We've invested heavily in trade shows, advertising, building our website with a responsive design that would work with multiple platforms … We recognized mobile is becoming so important [as a marketing tool]."

His company's logo, featuring an elegant line drawing of a lobster boat cutting through ocean waves with "Maine Coast" in bold letters beneath the image, has a closer affinity to Oriental line drawings than an Ogunquit art colony watercolor painting. That's by design, Adams says: "We struggled to get it right. We want it to be recognizable worldwide, but we didn't want just an old-fashioned lobster and logo label."

Great risk, great opportunity

With almost $2 million invested in his new facility and not a single customer lined up when he opened Maine Coast Shellfish in 2011, Adams says his business plan targeting international markets has paid off, with the company achieving profitability in its first year with $7 million in overall sales. Top-line sales grew to $15 million in 2012, $25 million in 2013 and $40 million in 2014.

He expects that torrid rate of growth will level off eventually and is already benchmarking his company against other comparable-sized shellfish distributors to make sure he's on a sustainable path. He's just made his first executive hire, a controller who'll be helping him do just that.

"We want to keep growing," he says. "We want to do it safely by mitigating whatever risks we can without getting too risk-averse."

Selling lobsters in international markets, Adams admits, is not for the faint-hearted. The "risks are considerable" in Asia's lobster market, he says, with mortality, shipping delays and unpaid receivables being the primary headaches. Almost on cue, as he was being interviewed, one of his sales team tells him a shipment of lobsters heading to China is held up in Newark's airport. The delay would extend the travel time from 48 hours to 60 hours. "Do we bring it back, or let it fly?" the salesman asks Adams, who's inclined to proceed but tells his salesman to call the customer as back-up.

"I don't want to make that decision without including the customer," he says. "Yes, we want to make the delivery and it is unfortunate an airline can delay our shipment without any recourse for us … That's $20,000 worth of lobster we are making a bet on."

The risk of not getting paid for a shipment, he says, also is a greater risk in an emerging market like China than in a mature one such as Europe, where longstanding and well-established customers are in place.

"I've had some bad debt, and I've taken steps to mitigate the risk," he says. "But you have to take the risk if you're serious about [capturing a significant share of the export market.]"

Building on a long fishing heritage

Matt Jacobson, executive director of the Maine Lobster Marketing Collaborative, says Adams, the Ready brothers and other dealers deserve credit for expanding international markets for Maine lobsters. "It's important for a lot of reasons, not the least of which is that the domestic market needs to grow too," he says. "The export market can serve as a buffer and help stabilize prices by broadening the overall customer base."

From a marketing standpoint, Jacobson says there's no question that "Maine" has a strong cachet both for the domestic and international lobster trade. It's based on a long fishing heritage and images of independent lobstermen heading out from cozy rockbound harbors in the early morning and harvesting an ocean resource sustainably with conservation measures such as notching the tails of egg-bearing females.

Adams agrees, saying his success very much depends on sustaining dozens of fishing communities all along the coast of Maine.

"We need each other," he says. "It takes many lobster fishermen, many harbors, to support what we do here. They are all my partners."

Read more

#MBNext16: Tom Adams globally exports an iconic Maine brand

Maine Coast live lobster footprint expands to Boston

Maine lobstermen report high prices for catch

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