Brice Phillips is the vice president of sustainability and business development of Baltimore, Maryland, U.S.A.-based Phillips Foods, Inc. and Seafood Restaurants, a family-owned and -operated seafood company specializing in crab meat and crab cakes, as well as fish and shrimp value-added products.
SeafoodSource: How did you steer Phillips through the Covid-19 pandemic?
Phillips: If we rewind back to April 2020, everyone spent two or three months watching the news about what's going on in China, wondering if and when is this going to the U.S. Everyone was just waiting for the shoe to drop. And then once it started happening, I remember very specifically, I think it was a Thursday afternoon at about three o'clock, Maryland Governor Larry Hogan came on television and said, “Tomorrow is going to be the last day of school. And for the next two weeks, we're going to be virtual”. So of course, just like the majority of America, I went right to Costco on my way home and bought toilet paper and paper towels.” It took me about 45 minutes to check out. And so for about a week or two, there were a lot of unknowns. We started getting calls. In the U.S., schools were shutting down, government offices were shutting down, restaurants were starting to close. Foodservice distributors called us up to say, “if you have trucks on the road, turn them around. We're not taking anything else because all the restaurants are closing and we're going to be shut down.” But then, the same day, we were getting emails from our retail partners, saying, “Hey, speed up our purchase orders – triple the volume if you can on that. Just fill the truck and get it to us. We're slammed. The shelves are empty!” So that month was a real whirlwind. On one hand, we were worried if we were going to be able to survive, and on the other, we were trying to figure out how the hell we were going to get enough inventory to satisfy all this overnight demand. And is this demand real? Is it just pantry-loading or people just scared they're never going to be able to buy seafood again, so they're going to buy whatever they can buy now? There was a lot of hesitation to make any type of move. But I think it was pretty clear that we were going to see a flip-flopping of retail and food service, which at Phillips, has always been roughly two-thirds to one-third. We eventually figured that out we just needed to turn on the production faucet for our retail items. With a lot of restaurants being closed across the country, reconfigured our production plan to focus solely on retail packs. So out of the metal can and into the plastic tubs – 16 ounces for club-store operators and eight ounces for retail.
SeafoodSource: How did that affect your supply chain and your company?
Phillips: One thing that really was a difference-maker for us was our long-term investment in our own factories and facilities. We still do use co-packers for some of our products, but it’s a small percentage mainly just for foodservice. But during the pandemic, we remained open and a lot of the co-packers that we use closed quite quickly. We saw a huge benefit because we invested in those factories over the years and we’ve always believed that owning and operating our own factories was the best way that we could most adequately address our demand that's out there as well as our intellectual property. And we insist that the quality of our final products must be the absolute best. It was strange that at the same time U.S. consumer demand shot sky-high, on the supply side, with so many factories closed, production became very limited. Our co-packer volume went to zero because they chose to close, so we just turned our factories into retail product factories. Instead of making one-dozen packs of crabcakes for food service, we were making two-pack crabcakes for the grocery store ... and six-packs for [club stores]. Because of that effort, I’m proud to say we never laid anybody off.
SeafoodSource: How about getting crab from places in Asia and elsewhere international that were completely shut down? Where were you sourcing from when overseas was hard to get?
Phillips: We continued sourcing from our own factories over there. We have four factories in Indonesia. Indonesia accounts for about half of the blue swimming crab imported into the US each year. We could still get product out of there even during the midst of the pandemic – Indonesia did a great job with trying to maintain the flow of goods. They didn't have a full-country lockdown like what China had with its zero-Covid policy. Some of our missing co-packer volume went to our factory in Vietnam. We also took the opportunity mid-pandemic to expand our footprint at out factory in Vietnam by building out value-added production capability there.
When the restaurant world shut down, we had all of our inventory in warehouses ready to go. We also had the last three months of production still floating over the ocean, so we essentially had six months of inventory on hand. And so when the foodservice world did open back up, we had an adequate inventory to get it relaunched. So we kind of waited until foodservice opened back up to restart the foodservice item production overseas because we didn't necessarily need new production with low demand from foodservice.
SeafoodSource: How hard was that conversion?
Philips: Not hard at all, actually. We've outfitted all of our six company-owned plants, not only to produce foodservice cans of crabmeat, but they've also got the machinery to do the plastic cups for retail and club operators. Pasteurization is largely the same process, with a little bit of a difference in timing with the eight-ounce and 16-ounce portions. So it was just changing some numbers on a production worksheet. There was a lot of work on the forecasting side with our sales team – they all had to rewrite their budgets. But for the foodservice team, it was very hard to predict three months out when you don't really know if schools or restaurants will be open. I think, overall, we were great with predicting when things would reopen.
SeafoodSource: How is business coming out of the pandemic?
Phillips: Here we are almost three years after and I'm seeing a convergence back to the pre-pandemic norm of the relationship between foodservice and retail. But what I'm not seeing is a return to the percentages of crabmeat versus value-added and I think that's because of this lingering labor effect. And I think as you heard today, even if this recession hits, the projected unemployment is only going to peak at about 5.5 percent like not too long ago, which used to be considered a really strong number. If you look at when the Obama administration took over, he was at about 10 percent. And it took him eight years to get down back to that. And it was a slow and steady game to get back to that. So even 5.5 percent, like people today would say, “That's a lot more unemployed.” However, I would argue it's just more or a return to normal. And so until that number loosens. Significantly, I think value-added volume will remain where it is. I think they're also looking at the rising cost of labor. So even if restaurants have the ability to bring production back in-house, it's going to be more expensive for them to make their own crabcake. So I think some of that will be stickier for longer. I certainly think it will be but Americans like to say we like change but at the end of the day, we're creatures of habit. And I think we will return somewhat to that norm.
SeafoodSource: Does Phillips do any other products besides swimming crab? Why do you still do other products?
Phillips: Yeah, we do yellowfin tuna. We do a lot of value-adding of shrimp and squid. I would say outside of blue swimming crab yellowfin tuna is probably our biggest protein. But it's still minor, probably less than 10 percent. Crab dominates the world for us. As for why we do other products, well, whether you're in the seafood or financial sector, it’s good to have diversity. We've always wanted to be a diverse supplier of seafood products. We also want to be a diverse supplier of non-seafood products as well. We're working on some non-seafood items right now. We've gotten USDA certification of a small pilot plant in Baltimore where we’re going to be working on some seafood and non-seafood products and perhaps also some combination items. We really want to be a bigger overall food company, not just in seafood. We've had some wins over the years in non-seafood at different retailers and clubs or operators. But we just want diversification. Honestly, it protects us on the financial side. For instance, if there's some type of major weather event that precludes us from fishing or if you have a major tsunami or volcanic eruption or earthquake in Indonesia, we could be knocked out for weeks at a time in some fishing areas or even longer.
SeafoodSource: Phillips closed many of its restaurants in recent years – was that as a result of the pandemic?
Phillips: We had five restaurants and we closed four out of the five during the pandemic. Some of them, honestly, were on their way to being closed before the pandemic. As a percentage of the company’s total business, the restaurant side of our business is minor. But it is important to us because our continued involvement there helps shape the types of product we create for foodservice and retail. Over the years, we built that business up – at one point, we had nine and now we're down to one company-owned restaurant along with several franchise locations in airports, casinos, and travel plazas.
Everyone is suffering from the lack of availability of labor. But we still maintain our franchise relationships, which have turned around as travel has picked back up. This has helped our foodservice volume pick back up, because we supply most of the food to them.
SeafoodSource: Lots of seafood companies are pushing deeper into value-added coming out of the pandemic. Are you doing that as well?
Phillips: We've always had a firm commitment to value-added products and we're going to stay firmly committed to that. Countrywide, people are having a hard time with staffing. For our foodservice customers, restaurants that five years ago would never even have us in now can't find the staff to prepare their own crabcakes. So now we're getting opportunities on the value-added side that we didn't have before. And so, for us, finding a way to increase our capacity for value-added going into the future is very important. We've always done a great job with value-added products and the majority of our supermarket sales are all value-added products. The same with our club store sales – we do very, very well with that. It takes a lot to run a value-added factory, because you need a far greater level of expertise and a substantial investment not only in personnel but in plants and equipment.
The next step is pushing forward with even more innovation. We've got a gentleman that lives in Bangkok – an American guy who’s been living there a long time, and he does all of our innovation in Asia. And he also works alongside a guy here in Baltimore who’s been in our restaurant group for over 30 years. Basically, our chef here in the U.S. works with our sales and marketing team to figure out what we want to make, and the chef in Asia will create those items based on what's readily available in Indonesia. Sometimes we have to import some ingredients that are very important to a recipe, but largely we work with what's readily available there. And they'll have some back and forth and figure out the best recipe, and then he will commercialize that into our plants. It has been a format that's worked really well for us, and we're going to continue to expand upon that.
I really think the future of seafood is in value-added. It allows us to take the seafood and stretch it even further. If you can come up with different formats, you take maybe someone who’s skeptical of seafood and create an item that's similar to something that they're already used to eating. For instance, take someone that that loves a Caesar salad. Well, why couldn't you do a Caesar salad and take a little bit of crabmeat and dress it with some Italian seasonings, a little bit of lemon juice and olive oil and salt and pepper and toss that and flip that in with a Caesar salad. Well now you have a seafood meal where you're really eating a salad, but you've introduced somebody to seafood, right? And that's kind of the way we look at value-added. Take for instance somebody who wants to hold a party. They’re going to go out maybe buy some pigs in a blanket, right, or maybe a charcuterie board. How do you get seafood into there? Well, you could take our crab minis ,you can take our shrimp toast, you could take our crab rangoons – you can find ways to introduce seafood to people without just being a fillet of fish or a rack of king crab legs.
SeafoodSource: So in that way you're saying crab is has versatility that lends itself to innovation?
Phillips: It does, and a lot of seafood has that versatility. Just look at all the value-added options with shrimp. Not just breaded – you can grill it, you can skewer it, you can mince it and produce a stuffing with it. You can do all sorts of stuff with shrimp and with crab. Some seafoods don't really lend themselves as well to value-addition, like king crab. I just eat that out of the shell because it's just so good to begin with. Lobster has some great value-added applications to it. You can mix finfish with other seafoods, which we do a lot in our restaurants. You could do a boil or a grilled shrimp stuffed with crab Imperial You could mix seafood and non-seafood in a surf and turf, or a chicken Chesapeake with a pounded-out chicken breast with crab Imperial. We are always looking for ways to either introduce new people to seafood or draw in people who prefer land-based proteins. I think there's a myriad of opportunities out there for people to increase consumption. That’s what we should all be looking at in the seafood industry – how do we increase the overall consumption of seafood overall, because that rising tide really does float all ships.
SeafoodSource: What segment of the market are you aiming for? Seafood lovers or dabblers?
Phillips: You have to aim for both. Hyper-consumers need no convincing and no marketing. They already know what they want. Maybe they're aggressively adventurous when they go out to a restaurant. It’s someone who is spending USD 275 (EUR 255) a year on seafood. They've already tried all the sushi and they can probably give you a top 10 list of finfish that they love. But they're already consuming everything they're going to consume. I really don't think you're going to get those people to eat more. They're already the outliers, and they are a very small sliver of the consuming public. And there’s people who will never eat seafood. They don't even think about it. I honestly don't have the patience to sit here and try to convert someone that's 40 years old who’s not buying any seafood at all. I think there's a bad ROI on that, even though that group is big and if you're able to convert just a small percentage of them and make them brand-loyal, then yeah, that's a big win.
Then there’s people who say they’ve tried seafood but don’t like it because it’s fishy. We’re still going after all of them. When I hear from someone who tried seafood once and they didn't like it, I always ask them why they didn’t like it. Most times, it’s because they had a bad experience. They tried something really low-end, maybe with a high percentage of filler, or maybe overly processed or a fish that was very oily. So there’s potential there for turning that around. To me, the way to exponential growth for the seafood industry is that center group, the people making the choice when they go to the grocery store between buying a fish fillet or a pork loin. I think it may be possible to bring these people into the seafood world with a milder flavor product or something that's mixed with non-seafood or something where seafood is a minor ingredient. For instance, my sister makes a great crab dip that’s maybe 15 or 20 percent crab and 80 percent cream cheese, mayonnaise, cheese, breadcrumbs, sauteed onions, and red peppers. That's a good way to bring it in, with just the little bit of the flavor of the crab. It's not too adventurous for people to get into it. Maybe they like it and then maybe they'll try a crab cake or a crab-mini next. Then maybe they become a fan of crab and then they move on to other proteins. But if they try a piece of seafood that's the last piece of salmon left sitting in the seafood counter, and it's a little sticky, if they eat that, they're going to be turned off, especially if they don't know how to cook it properly and either overcook it or undercook it. And it will take years of work to get those consumers back.
Photo courtesy of Cliff White/SeafoodSource
