Thai Union Group has apparently had enough endless shrimp.
The Bangkok-based seafood supplier, which has been an investor in Red Lobster since 2016, now wants out of the business, the company said on Monday, citing “prolonged negative financial contributions” to Thai Union and its shareholders.
In a release posted on the company’s website, Thai Union said that it plans to exit its minority ownership of Red Lobster, following a review of the business last year.
The combination of the pandemic, “sustained industry headwinds, higher interest rates and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders,” Thiraphong Chansiri, Thai Union’s CEO, said in a statement. “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.”
Thai Union recorded a loss of $19 million in the first nine months of 2023 from Red Lobster, the company said. It also recorded a one-time, non-cash impairment charge of $530 million for its investment in the business.
Golden Gate Capital acquired Red Lobster from Darden Restaurants in 2014 and Thai Union paid $575 million in 2016 for a minority stake in the business.
Thai Union led an investment group that surprisingly bought control of the chain in 2020, during the depths of the pandemic.
But Red Lobster has clearly struggled coming out of that era. In 2021 the chain hired Kelli Valade to be CEO. She left less than a year later to take the helm of Denny’s. The company took more than a year to name a permanent CEO in Horace Dawson.
The company early last year closed eight locations, saying they were “no longer viable.” But it also sought rent concessions and talked of turning the chain around.
In a sign of the challenges facing the company, Red Lobster in the third quarter last year priced its Ultimate Endless Shrimp deal at $20, which proved to be too low. The all-you-can-eat shrimp deal generated 4% traffic growth, but led to an operating loss of $11 million because the company lost money on the promotion.
Early last year, the Bangkok Post reported that Thai Union was reconsidering that investment, prompting the company to say it was committed to a turnaround of the business.
As for whether Red Lobster can find a buyer, that remains to be seen. Golden Gate sold much of the company’s real estate in a massive sale-leaseback shortly after its acquisition. The company finished 2022 with 662 locations, down 2.5% since 2019, according to data from Restaurant Business sister company Technomic. System sales declined 5% over that period.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.