Rafi Mohammed

Discovery Channel’s “Deadliest Catch” and Pricing

Posted on June 10th, 2009 (0 Comments)

I must confess to my guilty pleasure of regularly watching the Discovery Channel’s “Deadliest Catch” television show. Reportedly shown in over 150 countries, this reality show details the lives of skippers and crew who work in the deadliest profession – crab fishing in Alaska. Every show’s plot is predictable: fishing is bad (frustration), a few side plots (rivalries, human stories, and so on), and then at the end of the show, massive amounts of crab are caught (cue to crew dancing with joy). There’s something oddly entrancing to watch traps overflowing with king crab (hence profits) being pulled on board.

Interested in learning more, I researched the Deadliest Catch and Alaskan crab fishing…from a pricing perspective, of course.

It’s all about value. I was surprised to learn that close to 70% of all king crab consumed in the U.S. is imported, mostly from Russia. I always assumed that king crab came from Alaska. But come to think of it, most restaurants just advertise “king crab,” not its country of origin. Some of this Russian king crab is caught in the same sea that the Alaskan crabbers fish in. The Russian fleet is reportedly over fishing (which is not ecologically sustainable) and flooding the market with extra supply. This has resulted in significant price decreases for king crab. This understandably upsets Alaskan crabbers. From a value perspective, would you pay a premium at a store or restaurant for king crab legs that are advertised as “caught and processed in Alaska” compared to those from Russia? I would.

Is this really value? Captain Sig, one of the show’s main characters, has licensed his likeness (and that of his boat) to a company that is selling crab legs caught in Russia. These “Sig branded” two pound packages are sold at Wal-Mart stores. It’s an interesting deal as an endorser usually has some involvement in the product that they endorse. Consider the line of Wolfgang Puck products. Mr. Puck presumably has some input to the recipes of the food products attached to his name. However, in this case Captain Sig appears to be simply lending his name to a Russian company. Do consumers really value (thus, willing to pay more for) such an endorsement?

Negotiating en mass reaps profits. I found it interesting that approximately 70% of the crab fleet that fishes in the Bering Sea is represented by the Inter-Cooperative Exchange. This cooperative negotiates prices on behalf of its members with the six processors that purchase crab from the boats. By controlling so much of the supply, the cooperative holds market power which enables it to negotiate better prices. After all, if processors can’t come to an agreement with the cooperative, they lose out on 70% of the supply. Negotiating en masse results in higher profits compared to if each boat negotiates individually or accepts markets prices.

The Deadliest Catch is on the Discovery Channel on Tuesdays at 9 PM.

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