Few food items bring me back to childhood quite like Red Lobster's Cheddar Bay Biscuits. The nostalgic chain might churn up fond memories filled with popcorn shrimp, but the brand has hit hard times and might actually become a relic of the past. Based on recent reports, it's clear that Red Lobster is in hot water.
A Thailand-based seafood producer called Thai Union Group leads an investment group that bought majority control of Red Lobster in 2020. In January 2024, Thai Union Group announced its intentions to sell its stakes in the brand. But the news of Red Lobster’s potential sale shouldn't be much of a surprise: Eight Red Lobster restaurants shuttered in 2023. And nine months into 2023, Thai Union Group had lost $19 million from its investment. This year, CNN reported that on a February 19 earnings call, Thai Union Group updated their total 2023 losses to $22 million. That's a lot of shrimp down the tubes.
“After detailed analysis, we have determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore are pursuing an exit of our minority investment,” said Thiraphong Chansiri, Thai Union Group’s CEO, in a statement. He cited the COVID-19 pandemic, industry headwinds, rising costs, and high interest rates as having negatively impacted the restaurant.
“Red Lobster is done and over with," Chansiri said in the February meeting. "[We’re] just waiting for the sale to happen but we do not expect any significant value to be gained."
The relationship between Thai Union Group began prior to its $575 million strategic investment in the restaurant back in 2016. As a major global seafood supplier, the group was a strategic supplier to Red Lobster for over 20 years prior, according to Kim Lopdrup, the former CEO of Red Lobster.
But how are those of us without an MBA supposed to understand the turmoil facing our cherished cheesy biscuits?
It can partly be blamed on never-ending food promotions. These all-you-can-eat promotions are designed to get more people in the door, but at what cost? In June 2023, having generated 4 percent traffic growth year over year, Red Lobster made its Ultimate Endless Shrimp deal a permanent menu item. All-you-can-eat shrimp for just $20? Sounds too good to be true. But the promotion, according to Restaurant Business, led to a more than $11 million loss in the third quarter. They raised the price to $25, but arguably the damage was done.
Despite the losses, more endless-food deals have followed. To celebrate Red Lobster’s annual Lobsterfest, the chain brought back its Endless Lobster Experience, where 150 guests could win, well, endless lobster. It sold out in one day.
As of a January statement from Thai Group Union, it’s still “exploring available options for its exit.”
In a sea full of fish, Red Lobster might be finding out there is a limit to “endless.” The brand is in hot water for now, and eventually, the lobster might not have a pot to cook in.
