Red Lobster’s Menu Deal Just Backfired

By
Spencer Chase
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Red Lobster, a popular restaurant chain, faced financial challenges in the third quarter, resulting in a quarterly operating loss of 395 million Thai baht, approximately $11.3 million, according to investor Thai Union Group.

The company attributed part of this loss to the unexpectedly high response to Red Lobster’s Ultimate Endless Shrimp deal, where patrons could pay $20 for unlimited shrimp consumption. Despite an increase in customer traffic due to the promotion, the financial performance did not meet expectations.

Ludovic Garnier, the Group CFO, acknowledged that the promotion, priced at $20, did not generate significant profits, and while it brought some traffic, it fell short of anticipated levels. Red Lobster observed a 2% quarter-over-quarter and nearly 4% year-over-year increase in traffic during Q3, partially attributed to the shrimp deal.

Garnier noted that the company adjusted the deal’s cost to $25 but emphasized the need for cautious pricing strategies. Thai Union Group cited industry challenges, including elevated material and labor costs, high-interest rates, and a cyclically lower quarter, as contributing factors to the operating loss.

The company forecasted a 700 Thai baht share of loss from operations for Red Lobster in the fiscal year, marking a significant decline from the 1.2 billion Thai baht reported in 2022. Thai Union Group, which owns various brands such as Chicken of the Sea, Genova Premium Tuna, Sealect, and Fisho, also saw its stock experience a 15% drop over the past 12 months.

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