Thai Union Group, the seafood supplier and owner of Red Lobster, has announced its intention to exit the business. The decision comes as a result of a thorough review of Red Lobster’s performance, revealing “prolonged negative financial contributions” affecting Thai Union and its shareholders.

Pandemic and Industry Challenges

The ongoing challenges faced by Red Lobster, compounded by the impact of the pandemic, sustained industry headwinds, and rising costs, have led to financial setbacks. Thiraphong Chansiri, CEO of Thai Union, highlighted the adverse effects, stating that the combination of these factors no longer aligns with the company’s capital allocation priorities.

Financial Losses

Thai Union reported a loss of USD 19 million in the first nine months of 2023 from its investment in Red Lobster. Additionally, a substantial one-time, non-cash impairment charge of USD 530 million was recorded.

Leadership Changes

Red Lobster has experienced leadership changes, with Kelli Valade appointed as CEO in 2021 but leaving within a year to lead Denny’s. The company took over a year to name a permanent CEO, with Horace Dawson eventually assuming the role.

Location Closures and Operational Challenges

The challenges were further evident as Red Lobster closed eight locations early last year, deeming them “no longer viable.” Despite seeking rent concessions and expressing intentions to turn the chain around, operational difficulties persisted.

Pricing and Promotion Challenges

In an attempt to boost sales, Red Lobster priced its Ultimate Endless Shrimp deal at $20 in the third quarter of last year. However, the promotion, which generated 4% traffic growth, resulted in an operating loss of USD 11 million, illustrating the complexities of navigating pricing strategies.

Thai Union’s Investment History

Thai Union’s investment history with Red Lobster dates back to 2016 when it acquired a minority stake for USD 575 million. In 2020, Thai Union led an investment group to gain control of the chain during the depths of the pandemic.

Seeking a Buyer

As Thai Union plans its exit, the question remains whether Red Lobster can find a buyer. Golden Gate Capital, which acquired Red Lobster in 2014, has previously sold much of the company’s real estate. With a decline in the number of locations and system sales, the future of Red Lobster’s ownership is uncertain.