On a hot Baltimore day in August 2006, Phillips Seafood Restaurants were full of tourists lunching on local seafood specialties. Among them, Cherry Stockworth, vice-president of marketing for Phillips Foods, Inc., and Ron Birch, product manager for the new pasteurized king crab, were discussing the upcoming phase II of the launch of king crab (see Exhibit 1). In phase I, Birch had targeted foodservice buyers and had spent almost half of his $160,000 king crab launch budget for ads in foodservice trade magazines. For phase II, Stockworth was advocating a different strategy. She summarized:
Ron, king crab is one of the most important launches we have done in years. We are the leaders in blue swimming crab and our pasteurization process is arguably the best in the business. However, if we want to maintain our double-digit growth, we need to leverage the product diversification that king crab provides. In phase I, you have advertised the product in restaurant and institutional foodservice magazines, and the response has been good and the trade ads have worked well. Now, for this second phase, we must ensure an equally successful launch in the other two markets: food retailers and wholesale distributors. I know that your phase II plan is to stick with the proven trade advertising strategy but I think that we can generate more sales leads if we make king crab the centerpiece of our booth at the IBSS (International Boston Seafood Show) in March. This will generate buzz and give king crab the needed exposure to distributors and retail buyers. If we go that route, I will charge your budget for half of Phillips’ cost for the trade show. Please take a few days to consider this idea; work up the numbers on the two options and let’s talk next week to finalize the decision.
PHILLIPS FOODS, INC.
Founded by Augustus E. Phillips in 1914 on Hoopers Island, Maryland, Phillips Foods Inc. had grown into one of the largest seafood businesses in the United States ($160 million for 2006 sales) and was the number one U.S. brand for crab meat. The company was made up of three business units: (1) a restaurant division which operated eight full service restaurants in the Baltimore region and a growing franchise division along the East Coast (e.g. airport locations), (2) a foodservice products unit that sold to restaurants and foodservice institutions, and (3) a retail products division which sold directly (or indirectly via wholesalers and distributors) to grocery stores and other retail food merchants.
Phillips was renowned for its crab products and the brand image remained closely associated with its Maryland origins. Yet, the company had actively diversified its supply sources and production, and had 14 manufacturing sites (one in Baltimore and 13 overseas), and three sales offices outside the United States. Unlike most of its competitors, Phillips owned and operated all of its plants. It believed that this strategy ensured greater food safety and quality.
Phillips had also differentiated itself on at least two other fronts. Phillips was the first to perfect a method to pasteurize and can crabmeat while preserving a fresh-like product taste and texture. Once canned, the crabmeat needed to be refrigerated, but it enjoyed an 18-month shelf life. In retail stores, pasteurized crab was typically sold in self-service refrigerators that were located in proximity to the seafood counters (see Exhibit 2). To support these product innovations, Steve Phillips (CEO Philips Foods, Inc.) also implemented a bona fide branding strategy. Instead of selling crabmeat as a commodity, he invested in brand-building activities for the Phillips brand. In 2006, Phillips’ products could be found in over 10,000 retail stores in the United States. To sell to these stores, Phillips relied on its own direct-to-retailers sales force and on a network of food brokers, distributors and...