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Entrepreneur opens Maine lobster processing plant

9/1/2012

ST. GEORGE, Maine — The first shipment from Sea Hag Seafood left the plant Tuesday.

Kevin Bennett/Bangor Daily News
Kyle Murdock sits on a dock in front of the Sea Hag lobster processing plant he runs in St. George on Wednesday, Aug. 30, 2012.

For 23-year-old owner Kyle Murdock, the opening of the lobster processing plant was the culmination of nearly two years of planning and hard work.

Murdock, a Monhegan Island native, attended Worcester Polytechnic Institute in Worcester, Mass., majoring in physics with a minor in differential math. He was planning on entering the Navy to focus on nuclear propulsion.

While at college, however, Murdock was concerned about the fate of the lobster industry, which was worth $335 million to Maine harvesters last year. Since the Great Recession began in 2007, the price paid to harvesters has declined. The price paid to lobstermen plummeted further this summer. Prices fell in early July to $2.60 per pound. Earlier this year, some lobstermen stayed ashore in hopes of reducing the supply and increasing prices.

Murdock came from a lobstering family and has gone lobstering with family members. As a youth, he had a student license and fished several traps.

While heading home from college two years ago he thought about how lobstermen would be helped if there was a local processing plant to buy the product. As much as two-thirds of Maine lobsters at times are sent to Canada to be processed in plants there. Gov. Paul LePage earlier this year called for encouraging more processing in the state in order to add value to the Maine catch.

Beginning two years ago, Murdock had increasing numbers of conversations with people and developed a business plan to start up a local lobster processing plant.

One morning while home with his parents, his father woke him to inform him that the former Great Eastern Mussel Farm plant on Long Cove was available. Murdock toured the closed waterfront plant and made an offer, but that offer was rejected. He decided to return to college and friends were helping him move to an apartment in the fall of 2010 when he received word from the real estate broker that another bid on the plant had fallen through and his offer would now be accepted.

The Great Eastern property was foreclosed on by The First bank in 2009. The First sold the 7.5-acre waterfront parcel in March 2011 to Shining Sails Inc., which is owned by Kyle’s parents, John and Winifred Murdock.

One challenge was to get financing for the project, Murdock said, with the additional restrictions placed on potential lenders by banks following the financial crisis of 2008.

"It’s tough to convince a bank to loan a 23-year-old with no credit history $2 million. Most gave me a sideways look,” Murdock said.

He turned to Camden National Bank and met with its loan officials. He said there were many requests for additional information and he met them, and with its assistance, as well as support from the Maine Department of Economic and Community Development and other private financing, Sea Hag Seafood went from a business plan to a processing plant.

He praised the state for its assistance.

"They were extremely helpful. I couldn’t have done it without them,” Murdock noted.

One key part of that assistance was being designated in a Pine Tree Zone. That designation provides numerous tax breaks for fledgling businesses.

"The tax benefits are enormous,” he said.

Pine Tree beneficiaries receive sales tax exemptions, for example, on purchase of equipment. He said this amounted to a 7 percent discount for him.

Pine Tree benefits also include a 100 percent corporate income tax credit, 100 percent insurance premiums tax credit and access to lower electric rates.

The company also received a state Community Development grant and loan mix of $400,000, which was received with the support of the town of St. George. The town’s planning board approved the project in May.

Murdock said the entire project cost, with the purchase of the property, renovations and equipment, was between $2 million and $2.5 million.

Sea Hag began operating last week with the first shipment going out of the plant this week. The company employs 30 people on the manufacturing line and five managers. Part of the state grant requirement was that a certain number of employees had to be hired, with the workers being low-income.

As for him, Murdock said it is a full-time job to find sources of products. He said he shops around to various dealers and lobstermen.

The property is located on the water, where lobstermen can offload their catch, although, he noted, he does not sell bait or fuel, which would attract lobstermen to drop off their catch directly at the plant.

He expects to process one million pounds this year, noting that the plant did not start up until one third of the season had passed. He said the plant, if it was running two shifts, could conceivably process 80,000 pounds of lobsters per day for 160 days a year — this would amount to nearly 6,400 tons in a year.

He said that operating as a lobster processor during the winter will be difficult because of the decreased amount of product and how much more expensive lobster is during the off-season. He said he is considering processing other seafood.

He said that he has had difficulty trying to find enough qualified workers. He said some people came to orientation and then never showed up to work while others would come for training for an hour or two and decide this was not the job for them.

The Great Eastern Mussel plant closed in 2009 and Murdock said some of the people who lost their jobs have come to work for Sea Hag Seafood.

The lobsters can be cooked and frozen at the plant. The product is sold whole and in parts and as picked lobster meat.

His products are sold wholesale but he does have one retailer. Harborside Market & Gardens in Tenants Harbor sells his lobster meat under the Sea Hag name.