Red Lobster’s parent company, Thai Union Group, recently revealed that the popular seafood chain suffered an unexpected loss in the third quarter due to the overwhelming success of its $20 shrimp promotion, which turned out to be less profitable than anticipated.
During Thai Union Group’s investor and media presentation on Nov. 7, Chief Financial Officer Ludovic Garnier acknowledged that the promotion attracted a much larger audience than expected, impacting the company’s profit margins.
While Red Lobster has been offering an all-you-can-eat shrimp deal for years, the decision to make this promotion a permanent feature resulted in a surge of customers. However, the company miscalculated the cost implications of the increased popularity and its impact on Red Lobster’s market share.
Garnier pointed out that the rise in budget-conscious consumers led to the unexpected popularity of the “Ultimate Endless Shrimp” promotion, with customers opting for the unlimited shrimp at the expense of more profitable menu items.
In response to the unforeseen demand, Red Lobster incrementally raised the price of the shrimp item from $20 to $22 and now to $25.
While acknowledging the significance of the shrimp promotion for Red Lobster, Garnier emphasized the need for a more cautious approach to pricing to ensure profitability.
The higher-than-expected losses in the second half of the year, combined with other challenges in its divisions, led Thai Union Group to revise its anticipated losses for the year.
Thai Union Group’s investment in Red Lobster dates back to 2016, and the company, along with other investors, completed the acquisition of the restaurant chain from Golden Gate Capital in 2020.
Bloomberg News reported in March that Thai Union Group was considering selling its stake in Red Lobster if its performance did not improve.
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