After enduring significant financial setbacks in recent years, Red Lobster’s anticipated sale has Thai Union Group, its owner, bracing for underwhelming results. Despite initial optimism about the seafood chain’s potential, the reality has proven harsh, with mounting losses and operational challenges plaguing the company.

Initial Optimism Turns Sour

Thai Union Group’s acquisition of majority control of Red Lobster in 2020 was accompanied by ambitious projections for the brand’s future. Thiraphong Chansir, President and CEO of Thai Union Group, expressed confidence in Red Lobster’s “tremendous long-term potential” at the time of the purchase. However, the subsequent performance of the chain failed to meet these expectations.

Red Lobster’s difficulties have been multifaceted, encompassing high food and labor costs, as well as persistent operating losses. The closure of underperforming restaurants has been a recurring theme since Thai Union assumed ownership.

Disappointing Returns and Tough Choices

The reinstatement of Red Lobster’s popular Ultimate Endless Shrimp deal in June 2023 backfired, resulting in unforeseen operating losses of USD 11 million due to higher-than-expected customer demand. Additional setbacks, including USD 12.5 million in losses in the fourth quarter of 2023, further compounded the company’s financial woes.

Thai Union’s decision to divest from Red Lobster stems from its sustained negative financial impact. Despite hopes of recouping some value from the sale, Chansiri cautioned investors during an earnings call that significant returns should not be anticipated. The bidding process for Red Lobster is expected to extend over three to four months.

Confidence in Future Direction

While the decision to part ways with Red Lobster is regrettable, Thai Union executives remain steadfast in their belief that it is the prudent choice for the company and its shareholders. Emphasizing a return to the core business of seafood production, Thai Union aims to realign its focus for sustained growth and profitability.