Crab factory

Sun Reporters

By 9 a.m. the crab boats have already been coming and going from the pier for close to five hours, with migrant Burmese workers laboring to unload, sort, weigh and steam crabs that are destined for dinner plates on the other side of the world.

Presiding over this assembly line are Nantanee and Somsak Choeyklin, who remember when this crustacean that made them rich was only junk and they were poor. The blue swimming crab, known in Thailand as "horse crab," mottled and bluish-green, was little more than subsistence food when their parents were fishermen.

"When I was young, horse crab was worthless," Nantanee Choeyklin says. "We'd trade the horse crab for coconuts or some other fruit."

"Sometimes," her husband says, "we'd get it and just throw it back."

But this sea creature turned out to be strikingly similar to a classic American delicacy, Maryland's blue crab. The bad fortunes of the slowly disappearing Chesapeake Bay variety - its population in decline for more than 20 years, now holding steady near historic lows - created an opening for this previously unappreciated species 9,000 miles away.

A Maryland crab institution, the Phillips restaurants family, found that opening, discovering treasure where others had not. Led by Steve Phillips, Phillips Foods has in the past 15 years turned a foreign blue crab into a nearly $300 million-a-year industry, just as the industry back home was struggling. In the same stroke, Phillips Foods upended the equation of supply and demand in small fishing villages across the region, crowning an unloved crab as king.

Ask the Choeyklins what they think of "horse crab" now, and Somsak Choeyklin raises up his arms - his left wrist adorned by a diamond-encrusted gold Rolex that matches his wife's; his right wrist encircled by a solid-gold chain inscribed with a Superman-style S - and he declares triumphantly, "The horse crab is god!"

Sitting comfortably in plastic chairs on the pier, the air calm but strong with the odor of crab, they are at the center of a changed world. Nantanee Choeyklin is now mayor of Donsak, she and Somsak are wealthy, and what was once a small-time operation has become one of the town's largest employers, buying and selling crab that ends up in the United States.

The machinery of globalization has done its work, remaking Maryland's signature food into an industrialized product, processed and branded as carefully as a Nike basketball shoe. Crabmeat has become outsourced and commoditized, transformed from a Chesapeake Bay specialty into a manufactured good.

A new breed of crab industrialists - ambitious, opportunistic and well-capitalized - has fueled and profited from this boom. These new entrepreneurs have left behind an old breed of crabbers and pickers, the men and women of the Chesapeake Bay, who can't compete.

The influx of this crabmeat has made it possible to find Maryland's famous dish - the crab cake - in dive bars and white-tablecloth restaurants from Maine to New Mexico, except now the Chesapeake region's specialty is made mostly from Asian crab.

As in the past, with goods such as T-shirts and toys, few consumers seem to notice or care that their food is no longer from the United States. "Maryland crab" is simply rebranded "Maryland-style crab," and casual diners might be hard-pressed to notice a difference in taste.

The upside is this: The American consumer has wider access to a cheaper product. It's possible because an overseas army of fishermen, dockworkers and crab pickers labors long hours at low wages, some of them happily so, but some of them not. Before crabmeat lands on an American dinner plate, dozens of workers have handled it, from pulling it out of the sea in its shell to putting it on a shelf in its can.

In Donsak, migrant workers indenture themselves to a life of long hours, little sleep and even less leisure for, perhaps, just enough money to make life better back home - the seafood industry's version of factory towns. Local factory bosses such as the Choeyklins, and the U.S. companies they serve, reap the substantial profits to be made from mass production at low cost.

But as the people of the Chesapeake Bay learned, the boom can last only as long as the natural resource does. Before it becomes processed into an Asian factory product, Portunus pelagicus is a living thing, part of a delicate ecosystem that is increasingly vulnerable to the voracious appetites of globalization.

In the past decade, competition for crab has greatly increased as other companies have followed Phillips into Thailand's fishing villages. Amid rising prices and a declining harvest, Phillips all but pulled out of Thailand last year, looking to cheaper markets such as China and Vietnam to find the Asian blue crab it needs. The machine of globalization rolls on in its ceaseless search for more abundant, cheaper labor and resources.

Floating uneasily above the crab's natural habitat is the fisherman on a skiff powered by an old car engine, overtaken by larger commercial fishing vessels and trawlers that might be plundering his future, depleting the Thai crab like the Maryland crab before it. The watermen and pickers of Thailand may one day learn the same hard lesson of their counterparts in the Chesapeake Bay: In the ecosystem of globalization, they are near the bottom of the food chain.

Time was, the J.M. Clayton Co. of Cambridge was on top. A picking and packing business near the Chesapeake Bay, Clayton was, from not long after its founding in 1890, a full-service cannery - crabs, fish, oysters, even bullfrogs. One by one, though, economics whittled its inventory. Little more than crab remained.

The Clayton operation is in every sense a holdover, one of the last pieces of a culture that was dominated by those who worked the water. The three brothers who run the company established by their great-grandfather share a dingy, dark-paneled office along the Choptank River. Cubicles are created using metal dividers and furnished with bare metal desks and uncomfortable chairs. The quaint old building sits on prime waterfront property. Real estate development is the one true growth industry in Cambridge. Developers are putting up condominiums. No one is constructing new crab plants.

Other food industries saw major technological advances in the past century. Fresh vegetables gave way to frozen. Chickens began to be sold to the masses as boneless, skinless breasts. But Eastern Shore crab processors largely kept their traditional ways. The only revolution came in the 1950s with the introduction of high-heat pasteurization, which granted crabmeat a shelf life longer than a week.

Most of the work still had to be done by hand - lots of hands that performed the painstaking process of extracting meat from each steamed blue crab.

The only variable was the raw material: the erratic harvests of the Chesapeake Bay blue crab.

Clayton could get only what the watermen could catch. Not one claw more. The business was limited by what the bay provided.

It was a formula that worked for nearly 100 years. Then nature began letting the processors down.

Phillips restaurants bought from Clayton occasionally as well as from other Maryland processors, some of which are no longer in business. All of Phillips' crab used to be domestic crab.

The Phillips restaurant chain began in 1956 with a tiny Ocean City carryout that opened on Memorial Day and closed on Labor Day. It was a time when crab season meant too much crab. Steve Phillips' parents, Brice and Shirley, needed a place to sell surplus crabmeat from the family's Hooper's Island packing plant.

The carryout became a restaurant. The restaurant took off and then grew into a chain. The opening of an Inner Harbor location in 1980 and one in Washington in 1985 reinforced the need for a year-round supply of crab. By the end of the 1980s, 65 percent of the items on Phillips menus were made with crab - and the bay was no longer providing what the company needed. Neither were other states down the coast and along the Gulf of Mexico.

A search for more led Steve Phillips on a journey that he hoped would allow his family's restaurant business to thrive. His explorations turned into something else. He would ultimately reinvent - and greatly enlarge - an entire industry. The crabs on his menus, he realized, didn't have to come from the United States. They could be caught, steamed, picked and pasteurized in Asia in far larger quantities than they had ever been in the Chesapeake Bay. The virtual monopoly held by U.S. crab processors began to dissolve.

Turning to Asia, Steve Phillips built what would become an international company - Phillips Foods - that had revenues of $148 million last year and employed nearly 7,000 workers across the globe. Last year, Phillips imported 14 million pounds of crabmeat - six times what the state of Maryland produced. The company made 13 million crab cakes at its Locust Point headquarters, many following Shirley Phillips' nearly 50-year-old recipe.

This invasion of Asian crab has meant that Phillips restaurants, which now number a dozen, would never have to worry about running out of crab. But there was soon a new wrinkle. The company was bringing in so much crab, Phillips needed to find new ways to sell it.

It wasn't as simple as announcing that Phillips had crab for sale. Executives had to persuade people who had never before eaten crab - or who had tried it once on a trip to Baltimore - to ask for it back home in Arizona or Nebraska or Utah.

They also had to persuade chefs to cook new dishes with a new product. The marketing became a chef-to-chef campaign. Soon, the company was aggressively promoting a full line of dishes dependent on crab. There were chicken stuffed with crab, crab and spinach dip, crab pizza, crab pretzels, even something called a jalapeno crab slammer. This proliferation of Phillips' products is sold in grocery stores nationwide, in Roy Rogers fast-food restaurants and at Costco wholesale stores, something that never would have been possible without the development of the Asian fisheries.

"When crab was a local product, there wasn't enough of it to make it a national seafood item," said John Sackton, president of, an industry news service.

Ten years ago, the domestic crabmeat industry made up 76 percent of the blue crab supply in the United States. By 2004, U.S. processors were just 30 percent of the market, and the surge in Asian imports made up most of the difference. The dominance of imports is expected to only increase.

The increase so far has been staggering enough. In 2000, the first year the National Marine Fisheries Service began keeping statistics on what is called swimming crab - a category that comprises both the blue crab caught off parts of North and South America and the species caught in Southeast Asia - more than 23 million pounds, worth $117 million, were imported into the United States.

In 2004, 35 million pounds were imported with a value of $205 million. Last year, more than 46 million pounds of crabmeat, worth nearly $300 million, entered the United States from abroad.

"We seem to be on the top end of the wave for crab cakes," said Art Nermoe, head of culinary research and development at Granite City Food & Brewery, a small Minnesota-based chain that serves a crab cake appetizer made with cheddar cheese. "Menu items go in cycles. Comfort food to avant-garde and back. Cyclically, things come and go. Seafood's hot."

Globalization sometimes means the merest whims of the world's wealthiest nation decide winners and losers. The proof of that is embedded in the peculiar and eminently expandable taxonomy of the American diet. When the Choeyklins started buying and selling seafood off the Donsak pier 15 years ago, they could not have known that one day they'd be making it possible for Americans to eat crab pizzas and crab-stuffed chickens.

Today the wharf neighborhood that surrounds their pier manifests the crab as commodity. The paved streets are less fishing village than factory town, with stretches of warehouse buildings where the company residents work and sleep, interspersed with small shops, sidewalk food stalls and bars where the workers and their families shop, eat, gamble and find a moment of respite. The emblematic figure is not a fisherman but a factory boss, in the towering form of Somsak Choeyklin. He plays the role with conviction, purposefully stalking the pier until he drives away in his SUV.

Before all this, before globalization, Somsak and Nantanee Choeyklin were merely assuming the position of middleman in the local pecking order, which is roughly the same in any traditional fishing community that catches more than it can eat. Their money was made by buying the day's catch and then tacking on a small amount per kilogram as they sold it to local markets either fresh or frozen.

The sea provided enough to catch, the fishermen made a little money, the Choeyklins made a little more money, and together they fed their countrymen. With the significant exception of the shrimp industry, this fundamental domestic equilibrium had remained largely unchanged until the late 20th century. The blue swimming crab was abundant and inexpensive, perfect for local consumption.

Then Steve Phillips arrived, looking for blue crab.

Phillips grew up catching crab and exploring the marshes of the Eastern Shore. He heard there was a crab out there similar to the one he had always caught in the Chesapeake Bay. But this one was halfway around the world, in the Philippines.

Phillips went to the Philippines on a shrimp-buying trip in the late 1980s and traveled to a remote island to discover whether the story was true. There, he found Portunus pelagicus. The blue swimming crab, as it is more commonly known in the United States, was similar in taste and texture to Callinectes sapidus, the savory Atlantic blue crab long eaten in the Chesapeake region but slowly disappearing. The Asian crab didn't taste as sweet, but it had beautiful, large white lumps of meat that made it a suitable substitute for a Maryland business in need.

In 1990, Phillips bought land in the Philippines and built his first Asian processing plant. He hired fishermen, bought them equipment and, the way a Phillips Foods corporate history puts it, taught them how to crab.

In 1994, Steve Phillips opened a plant in Indonesia. In 1996, he opened one in Thailand. Today, the company says it has plants in nine countries - from India to Madagascar to Malaysia.

Phillips, 59, declined several requests by The Sun to discuss his Baltimore-based company, which is privately held, but interviews with Thai fishermen, crab pickers, middlemen and Phillips Foods' competitors make clear that when his company came to Thailand, it radically altered the equation of supply and demand.

Circumstance, timing and luck coincided to present the Choeyklins with a golden opportunity, but they also had to have the vision and daring to seize it. Steve Phillips was looking for middlemen who could reliably bring in a lot of blue swimming crab and who would be willing to change the way the crab was caught, cooked, handled and sold. The middlemen and their suppliers, the fishermen, would have to invest time and money to become processors in a global market.

It was a gamble not everyone was willing to take. What if Phillips decided later to leave for other countries? What if the consumer market for crab turned out not to be big enough to justify the expansion?

In Nantanee Choeyklin, Phillips found a driven, ambitious businesswoman willing to take the risk. But as the principal owner of her business, she did have reservations. With a big new buyer like Phillips coming in, she told the company, crab wouldn't be so cheap anymore and Phillips might not be so eager to buy.

"The price will go up," she told the company. "Can you handle that?" When the answer came back yes, she decided to hitch her fortunes to those of Phillips Foods.

The gamble paid off handsomely. A modestly successful middleman in Thailand might buy and sell a few hundred pounds of crab a day. By the time Phillips Foods temporarily left Thailand last year, the Choeyklins' little empire by the sea was taking in 5 tons of crabs daily, picking about 1.2 tons of crabmeat daily (4 pounds of crabs yield roughly 1 pound of crabmeat), and selling the meat to Phillips at about $6 a pound.

Phillips had pushed the Choeyklins to modernize and expand the entire chain of production. At first, the crabs arrived at shore dead and red; Phillips wanted live, blue-hued crabs, fresh for steaming. So fishermen had to modify their boats to store crabs in plastic vats of seawater, oxygenated with air hoses.

To meet Phillips' demand for crab - and later other companies' demands as well - there also needed to be more boats; large crab boats and trawlers, once rare in the waters off Donsak, would number well into the hundreds by the end of the 1990s. Today, there are well over 1,000.

At Phillips' request, the Choeyklins also built a picking plant with interest-free loans and investments from Phillips in 2001. The Choeyklins eventually hired 120 full-time pickers. Phillips also asked them to upgrade the cleanliness of their site: Now all the pickers wear Phillips-issued uniforms, with hairnets, rubber gloves and rubber boots. They wash their hands in solutions of iodine instead of with soap, and they dip their boots in chlorine, not water, to disinfect.

"Every time there was a change, Phillips was the one who initiated it," Nantanee Choeyklin said.

Phillips' success has inspired competition, with at least five other companies in Thailand sending crabmeat to the United States.

At the 2005 International Seafood Show in Boston, Ron Ratkelis, who used to operate a crab plant in Louisiana but now works with an Asian seafood company, said he was taken aback by the number of different companies hawking crab - 28 were listed in the program as blue crab sellers. "I almost wanted to call it the Boston Crabmeat Show," he said.

"I used to be able to keep track of the labels on two hands," he said. "Now someone will name a label, and I haven't heard of it."

Crab consumption in the United States, meanwhile, has doubled in the past decade, according to the National Fisheries Institute, a trade association. Crabmeat has surpassed cod and clams as a favorite in the American diet. Shrimp is still No. 1, but crab is gaining.

As global demand for crab grew, back in Thailand the Choeyklins expanded their business and extended their local influence, using their cash and Phillips connection to consolidate control of the chain of production.

They owned a few of the boats on the water, and they had made, by their own estimate, about $500,000 in loans to fishermen for boats and upgraded equipment. Whether the loans won the loyalty of fishermen or simply made them beholden, the Choeyklins built a guaranteed stable of crab suppliers in what was becoming a competitive market.

In 2000, Steve Phillips made what the Choeyklins said was his second visit to their pier. Their business was ascendant and prospering, Phillips was pleased, and they adjourned to a popular seafood restaurant for lunch.

On a roofed patio overlooking the water, the Choeyklins, Phillips and two of his executives dined on the crustacean that was making them all rich, Portunus pelagicus. Then, the Thai couple said, after tasting some of the white meat from a freshly cooked crab, Phillips told them, "The crabmeat from Thailand is the most delicious in the world."

If Southeast Asia is where the winners of globalization do their business, Maryland's Eastern Shore is home to players who lack the arsenal needed to play the same game.

Maryland's crab industry, once grateful to an ecosystem that helped the state reign as the blue crab capital of the world, is trapped by that same environment, now in decline. While seeing success after success overseas, the Shore has watched its own industry rapidly contract.

In 1997, there were 49 businesses in the state certified to pick crabs. Three years later, there were 35. Last year, there were 27, according to the Maryland Sea Grant Extension program.

It was about a decade ago, in the middle of summer - high season for crabs - when Jack Brooks noticed that orders for the Clayton company's crabmeat were drying up. It was the same product his great-grandfather started selling in 1890. But suddenly many of his regular wholesale customers weren't calling.

"People just stopped buying," Brooks recalled.

They were buying Asian crabmeat from Phillips instead.

"Some of the customers were not being upfront. Others were saying, 'I've got to be honest, the stuff's cheaper. It's cheaper than yours,'" he said.

It was not much different from the classic manufacturing story of the late 20th century, just without as many headlines: Brooks and his domestic competitors were finding the market flooded with imports. Brooks said it wouldn't have been so bad if Phillips Foods had started selling its imported product in other parts of the country, but the company understandably focused its efforts where blue crab was already part of the food lexicon.

The local processors once set the price. Fewer crabs, higher price. A glut of crabs, cheap bushels for sale.

Now imports would be setting the price.

"If someone else is selling, they're caught in a squeeze," said Bill Sieling, executive director of the Chesapeake Bay Seafood Industries Association. "There's a very narrow window in the industry. It's a struggle every day."

The loss of Maryland processors - and Shore jobs - has been a quiet, steady march for a decade.

"It hasn't been big news," Sieling said. "It wasn't like Beth Steel closing down or a big department store. It's been very gradual."

In 2000, a group of processors from Maryland, Virginia and the Carolinas organized as the Blue Crab Coalition and took action. The processors had seen crawfish producers in Louisiana fight Chinese imports - and win. Federal trade officials placed tariffs on the imports, protecting domestic crawfish against the cheap crustaceans from abroad.

Inspired by that success, Brooks and the others filed a petition with the U.S. International Trade Commission seeking tariffs on imports of blue swimming crab from Asia. Instead of facing off against a foreign nation, they were going head-to-head with a coalition of U.S.-based importers of Asian crabmeat - led by Steve Phillips of Baltimore's Phillips Foods.

Without intervention, the domestic processors argued in their 2000 petition, "the processing industry, the watermen, and the rural coastal culture will not survive."

If they won, the processors hoped to take the tariff money and finance a large marketing campaign to brand their crabmeat as a better-tasting product, following the lead of the beef industry's "Certified Angus Beef" labeling. The money was meant to match the millions Phillips Foods was believed to be spending on big-time marketing - something Phillips could afford, the domestic folks argued, because of its "lower labor costs and high profit margins."

The domestic processors lost.

"We just got outmuscled," Brooks said.

A majority of the trade commissioners sided with importers because, as the commission wrote, any injury being done to the crab industry was a result of falling crab harvests, not increased competition. The steep increase in demand for crabmeat in the United States, it ruled, proved there was room for both the domestic and foreign products.

That was six years ago. Many of Brooks' brethren have since gone out of business. One now drives a mail truck. Another sold his land to a developer. Another lobbies for the shrimp industry.

Janice Marshall is one of the casualties. The founder of a crab-picking cooperative on Smith Island, she now earns a regular paycheck at a state prison in Westover and picks only part time. "I'm a crab picker at heart," she said. "I'm a correctional officer by necessity."

The processors who remain have all but given up the fight. There is talk of campaigns to persuade people to buy local, there is special packaging in the works and there are brochures espousing the virtues of Maryland crab. But there's very little muscle - or money - behind it.

And, after years of trying to beat back the advance of foreign crabmeat, Clayton's Brooks is exploring an unlikely expansion - in Asia. One of the lead advocates for domestic crabmeat has decided to look overseas. His business could depend on it.

"Everyone likes to use the image of Maryland crabs and the watermen, but that doesn't put any money in [local] people's pockets," said Sieling, the industry association official. "They've got to sell something to make money."

Compared with the Chesapeake Bay, Southeast Asia's vast waters are home to a seemingly endless stock of crabs. But any one fishing spot that feeds the American appetite is in danger of drying up.

In 2001, the Choeyklins built a small crab hatchery at the pier, where breeding females are kept until they shed their fertilized eggs, an average of 500,000 each. The females are moved on to be steamed, but their eggs hatch and grow into tiny young crabs. Few will survive for long once they are released into the sea - the crab's life cycle is less a cycle than a brutal winnowing - and only some of those will grow large enough to become dinner like their mothers.

It is but one rudimentary effort to tilt the balance back in nature's favor. The industrialization of Thailand's blue swimming crab, only a decade old, may be threatening to destroy it.

"We noticed that the natural resource was declining, and we were trying to think of how to sustain it," Nantanee Choeyklin said. "There's a decline of 50 percent in the crab due to more people fishing, using longer nets, bigger traps."

"There's going to be a crisis of scarcity of the crab. The swimming crab will be reduced greatly," said Vitaya Havanont, a government marine biologist working in Ranong, on Thailand's west coast, where villagers have subsisted on the swimming crab for generations.

Havanont describes an unsustainable chain reaction occurring in Thailand that is a textbook model of overaggressive fishing: An increase in the demand for crab drives the price up and draws more fishermen out to sea. That, in turn, increases the incentive to find ways to catch more crabs as quickly as possible, resulting in larger harvests.

As the sea's stock of crab decreases, the problem only gets worse. The price rises and the incentive grows to catch whatever remains, including breeders and small crabs that will never get a chance to breed. And if the price jumps too high, companies such as Phillips can get the same crabmeat cheaper in other countries until the same pattern repeats itself there, while the fishermen left behind look for other livelihoods.

Some in the crabbing industry contradict this scenario, arguing that measuring how much crab is caught - as Thai officials have done - does not accurately determine the actual stock of crabs in the sea. They say there are plenty of crabs left to catch.

The numbers so far seem to suggest otherwise. The annual harvest of blue swimming crab (mixed in with a small amount of another species of crab) has steadily declined from a peak of 51,500 tons in 1998 to roughly 32,000 tons last year, according to Thai government figures. During that time, the price of crab has as much as tripled, Thai fishermen and biologists say. But with increased competition at sea and smaller harvests, fishermen are catching so much less crab that they're making little more money.

"Ten years ago, the minimum was 20 kilograms of crab" - 44 pounds - "for this kind of net," Suthep Prabsamut said as he sat one morning on a thick tree branch on the beach of a small island village off the coast of Ranong. He is watching as relatives disentangle a morning's catch from 600 yards of crab net; today they will have little more than 25 pounds. "Back then the price was not as high, but the catch was plentiful."

Prabsamut's face appears much more worn than his 34 years. He said he earns at most $150 a month, $100 less than a decade ago. Some periods in the intervening years have been good; when Phillips Foods was buying crab caught by these fishermen, the price was going up and the catches were still sizable.

But Phillips stopped buying crab from this part of Thailand after the tsunami struck in December 2004, businessmen here said. The price of crab has dropped, the harvests remain smaller than they used to be, and the fishermen in this village of fewer than 150 people want their children to walk away from their ancestral profession. Prabsamut has a 7-year-old son.

"It's up to him, but I don't want him to be a crab fisherman because the future is not bright," Prabsamut said. For himself, he said, "the future is just to keep going. I have no alternative job. But it won't be very prosperous. It will be just surviving."

It's a story already being told on the Chesapeake Bay, though maybe not for long. The blue crab fishery remains the largest commercial fishery on the bay, with a 2005 dockside value of $32.7 million in Maryland alone, but it's the only significant fishery left. Gone, or almost gone, are the sturgeon, the rockfish, the shad. Oysters carry just a fraction of the economic weight they once did.

"The sturgeon was the first fish overfished in the Chesapeake Bay," said William J. Goldsborough, a senior scientist with the Chesapeake Bay Foundation. "The crab may be the last."

About the seriesStephanie Desmon andGady A. Epstein begantheir reporting for this seriesin 2005. Desmon, amember of The Sun's statestaff, reported from theEastern Shore, Washingtonand Minneapolis, Minn., aswell as Baltimore. Epstein, amember of The Sun'sforeign staff, reported inThailand. Staffphotographer ChiakiKawajiri worked alongsideboth reporters, in SoutheastAsia as well as the UnitedStates.

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