Luke's Lobster Founders on Seafood During a Pandemic | How I Built This with Guy Raz | NPR

TL;DR

Luke's Lobster responded to the pandemic by shrinking quickly, prioritizing employee safety, and shifting seafood sales from restaurants, casinos, and cruise lines toward grocery products. Transparent personal communication helped preserve employee trust, while reopening its seafood company and 12 shacks allowed the business to resume buying from fishermen and support the broader seafood supply chain.

Transcript

hello everyone and welcome to how i built this resilience edition from npr uh this is where we talk about how businesses are building resilience during this challenging time happy casual friday to everybody i hope you're excited for the weekend i really need it i'm excited um in the window next to me are luke holden uh and ben conniff the co-founde... Read More

Key Insights

• Luke's Lobster acted quickly in March by becoming much smaller, furloughing or terminating employees, reducing salaries, and closing every shack except one. These measures were described as painful but necessary to preserve a seasonal business whose sales had fallen sharply before its strongest earning period.
• Employee safety was the company's highest priority during the shutdown. Management intentionally moved hourly workers toward unemployment quickly because it expected backlogs at unemployment offices and believed the additional $600 in federal support would give those employees a source of financial stability.
• Transparent communication was maintained through personal conversations with every affected teammate. The founders avoided impersonal texts and emails, explained why decisions were being made, and kept open dialogue afterward so employees understood management's reasoning even when outcomes or forecasts remained uncertain.
• Luke's Lobster viewed its responsibilities as extending beyond its direct employees. The founders said the company also served fishermen, truckers, and production workers, making its ability to resume seafood purchasing important to the survival of a broader interconnected industry.
• Seasonality intensified the company's financial vulnerability because it normally earns most of its money between Memorial Day and Labor Day. The disruption arrived near the end of its reserves, just before the period when the business would ordinarily begin rebuilding those reserves.
• Restaurant closures destabilized seafood demand because about 70 percent of seafood in the United States was consumed in restaurants. Removing that channel left producers and fishermen with an imbalance that required Luke's Lobster to redesign how its seafood company packaged and sold products.
• The company's central commercial pivot was from food service toward grocery retail. Seafood previously destined for restaurants, casinos, and cruise lines was reallocated into branded freezer and refrigerated packages that consumers could purchase and prepare in their own kitchens.
• Reopening depended on the trust created during the shutdown. After initially keeping only one shack open, Luke's Lobster restarted its seafood company and brought 12 shacks back into operation, a recovery the founders connected directly to their people-first approach and continued employee communication.

Questions & Answers

Q: How did Luke's Lobster respond when pandemic sales collapsed?

Luke's Lobster reduced the business rapidly after the crisis became severe in March. The founders furloughed or terminated workers, reduced salaries, shut down the seafood operation temporarily, and closed every shack except one. They organized the smaller company around a limited set of strategic priorities, with employee safety first, while trying to preserve enough of the business to reopen and resume buying seafood later.

Q: Why did Luke's Lobster move hourly employees to unemployment quickly?

Management expected unemployment offices to develop backlogs, so it wanted hourly teammates to enter the system as early as possible. The founders also knew unemployment included an additional $600 from the federal government, which could support workers while operations were closed. They presented the decision as both a safety measure and a deliberate attempt to give employees greater financial stability during an abrupt collapse in sales.

Q: How did the founders communicate layoffs and furloughs to employees?

The founders held personal conversations with every affected teammate rather than relying on texts, emails, or other detached messages. They explained the company's financial condition, the reasoning behind each decision, and the intention to protect both employees and the business. They then maintained open dialogue and checked in with workers, which helped preserve trust and supported the later process of bringing people back when operations reopened.

Q: Why was the pandemic especially damaging to Luke's Lobster?

Luke's Lobster was highly seasonal and made most of its money between Memorial Day and Labor Day. The disruption arrived when the company was near the end of its existing reserves and just before it normally began rebuilding them. Sales fell from normal levels to about 20 percent and eventually nothing, leaving little financial capacity to maintain payroll and normal operations through the shutdown.

Q: How did restaurant closures affect the seafood supply chain?

About 70 percent of seafood in the United States was consumed in restaurants, according to the founders. When restaurant demand largely disappeared, seafood production and purchasing became severely imbalanced. Fishermen still needed to fish and earn a living, while restaurant buyers, casinos, and cruise lines were no longer taking their usual volumes. Luke's Lobster therefore needed new channels capable of absorbing seafood production.

Q: How did Luke's Lobster pivot from food service to grocery sales?

The seafood company reengineered its packaging and sales approach for grocery retail. Instead of relying mainly on large commodity packages sold to restaurants, casinos, cruise lines, and other food-service customers, it began producing branded packages for freezer and refrigerated displays. This allowed seafood that restaurants were no longer buying to be redirected toward consumers who were preparing more meals and trying more seafood at home.

Q: Why did Luke's Lobster continue supporting fishermen during the crisis?

The founders believed the company served a community larger than its restaurant workforce, including fishermen, truckers, and production employees. If Luke's Lobster could not buy the seafood it had expected to purchase during May, June, and July, the effects would spread through that entire system. Preserving the company and finding grocery demand were therefore presented as ways to keep fishermen working and the broader seafood ecosystem functioning.

Q: What role did company values play in Luke's Lobster's pandemic response?

Transparency and a people-first approach guided the company's decisions. Management explained its financial reality honestly, communicated personally with affected workers, and continued sharing how decisions were being made. The founders said these established relationships and trust helped employees understand that the company had few alternatives. They also credited that approach with enabling the seafood company and 12 shacks to reopen when conditions allowed.

Summary

In this video, Guy Raz interviews Luke Holden and Ben Conniff, the co-founders of Luke's Lobster. They discuss how the company has been building resilience during the COVID-19 pandemic by pivoting their business strategy and focusing on direct-to-consumer sales. They also talk about the challenges they have faced, including the need to shut down their processing plant and furlough employees, and how they have worked to support their employees and the entire seafood supply chain.

Questions & Answers

Q: How has Luke's Lobster adapted to the challenges posed by the COVID-19 pandemic?

Luke's Lobster has made several adjustments to their business strategy to navigate the challenges of the pandemic. They have focused on direct-to-consumer sales by offering products through their website and partnering with grocery stores. They have also pivoted from selling to restaurants and food service providers to producing grocery-branded products and selling directly to consumers.

Q: How did Luke's Lobster handle the need to furlough employees?

Luke's Lobster acted quickly to furlough employees and ensure their financial stability. They moved all hourly employees to unemployment, knowing that there would be backlogs in the system. They also had personal conversations with each employee to explain the reasons behind the decisions and to provide support and transparency throughout the process.

Q: How has Luke's Lobster managed the seafood supply chain during the pandemic?

Luke's Lobster has had to adjust their seafood supply chain due to the decrease in restaurant sales and the disruption of the industry. They have worked closely with fishermen to ensure they can continue fishing and earn a living. They have also expanded their grocery-branded business to include a wider range of seafood products, allowing them to support the entire supply chain and create new revenue streams.

Q: How have Luke's Lobster's international locations in Japan and Taiwan been affected by the pandemic?

Luke's Lobster's locations in Japan and Taiwan have faced similar challenges to their U.S. locations. While they are open, they are highly dependent on international tourism, which has significantly decreased due to travel restrictions. This has resulted in lower sales and a need to adapt their operations to the current situation.

Q: How has Luke's Lobster approached sustainability in light of the pandemic?

Luke's Lobster is committed to sustainability and ensuring the long-term health of seafood populations. While there may be specific challenges or certification issues related to lobster sustainability, they have dedicated themselves to maintaining transparency and working closely with fishermen to support their livelihoods and promote sustainably caught seafood.

Q: How has Luke's Lobster expanded their business during the pandemic?

Luke's Lobster has expanded their direct-to-consumer e-commerce business, offering a wider range of seafood products for home cooking. They have also explored partnerships with grocery stores to increase their reach and distribution. By adapting their business model, they have been able to reach more customers and support the seafood industry.

Q: What have Luke and Ben learned about their own leadership during this challenging time?

Luke and Ben have learned the importance of transparency and purpose in their leadership. They have maintained open and honest communication with their team, ensuring that everyone understands the decision-making process and the rationale behind their actions. They have also reaffirmed their commitment to the core values of the business and the mission of creating a better world through sustainable seafood.

Q: How has the pandemic affected the sustainability certification of Maine lobster fisheries?

The Marine Stewardship Council (MSC) is planning to revoke Maine's lobster sustainability certification due to legal issues related to right whales. Luke's Lobster believes that this decision is not relevant to Maine fishermen and highlights the need for more specific and targeted certifications. They will continue to focus on the sustainability of their catch and communicate the actual situation to their customers.

Q: How has the pandemic affected Luke's Lobster's plans for expansion?

While the pandemic has created challenges for expansion, Luke's Lobster sees opportunities on the horizon. As the restaurant industry undergoes significant changes, there will be more real estate and market opportunities available. They will continue to adapt and grow, focusing on their core brand mission and expanding their reach through direct-to-consumer sales and new revenue streams.

Q: What are some key takeaways from Luke's Lobster's experience during the pandemic?

Luke's Lobster's experience during the pandemic highlights the importance of resilience, adaptability, and a strong team culture. They have successfully pivoted their business strategy, supported their employees and the seafood supply chain, and found innovative ways to continue serving their customers. They have learned the value of transparency, purpose-driven leadership, and a commitment to sustainability in navigating challenging times.

Summary & Key Takeaways

• Luke's Lobster entered the pandemic at a financially vulnerable point because its seasonal business earns most of its money from Memorial Day through Labor Day. As sales fell from normal levels to 20 percent and eventually nothing, the founders rapidly furloughed or terminated workers, reduced salaries, and closed all but one shack.

• The company treated safety and people as its highest priority. Hourly employees were moved quickly toward unemployment because management expected administrative backlogs and knew federal support included an additional $600. Every affected teammate received a personal conversation explaining the reasoning, followed by continued communication intended to preserve relationships, transparency, and trust.

• With about 70 percent of seafood normally consumed in restaurants, the disappearance of food-service demand created a severe supply-chain imbalance. Luke's Lobster reopened its seafood company and 12 shacks, then redirected production from restaurants, casinos, and cruise lines toward branded grocery packages for freezer and refrigerated displays as consumers cooked more seafood at home.