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 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: 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 ...
Photo courtesy of Cliff White/SeafoodSource
