Red Lobster, the popular seafood chain, has learned the hard way that offering unlimited shrimp for a low price can be a costly mistake. The company’s parent, Thai Union Group, revealed that Red Lobster suffered an operating loss of $11 million in the third quarter of 2023, mainly due to its “Ultimate Endless Shrimp” deal.
How the Shrimp Deal Went Wrong
The shrimp promotion, which allowed customers to choose two types of shrimp and eat as much as they wanted for $20, was launched in June as a permanent menu item. The idea was to boost traffic and market share in the third and fourth quarters when business usually slows down for Red Lobster.
However, the deal turned out to be too popular and too cheap for the company’s bottom line. Customers ordered more shrimp than expected, and the low price point did not cover the costs of the ingredients, labor, and marketing. Thai Union CFO Ludovic Regis Henri Garnier said in an earnings call that the company knew the price was cheap, but did not anticipate the high demand.
“We wanted to boost our traffic, and it didn’t work,” Garnier said. “We want to keep it on the menu. And of course, we need to be much more careful regarding what are the entry points and what is the price point we are offering for this promotion.”
How Red Lobster is trying to fix the problem
In response to the disappointing results, Red Lobster has gradually raised the price of the shrimp deal from $20 to $22 and now $25. Garnier said that the company still wants to keep the promotion on the menu, as it is one of the iconic offers for Red Lobster, but needs to be more careful about the pricing strategy.
“It’s one of the iconic promotions for Red Lobster, so we want to keep it on the menu but, of course, we we need to be much more careful regarding what the entry point and what the price point we’re offering for this promotion,” Garnier said.
Red Lobster is also trying to improve its profitability by reducing its costs, optimizing its supply chain, and enhancing its digital capabilities. The company hopes to achieve a positive operating profit by the end of 2023.
What customers can expect from Red Lobster?
Despite the setback, Red Lobster is not giving up on its shrimp-loving customers. The company is still offering the “Ultimate Endless Shrimp” deal, albeit at a higher price, and has added new shrimp options to the menu, such as garlic shrimp scampi, coconut shrimp, shrimp linguini alfredo, Walt’s favorite shrimp, and garlic grilled shrimp skewer.
Customers can also enjoy other seafood dishes, such as lobster, crab, fish, and scallops, as well as the signature warm Cheddar Bay Biscuits. Red Lobster has also introduced a new loyalty program, called My Red Lobster Rewards, which allows customers to earn points and redeem rewards for every visit.
Red Lobster, which has more than 670 locations in the U.S. and Canada, is one of the largest seafood chains in the world. The company was founded in 1968 and was acquired by Thai Union Group, a Thailand-based seafood company, in 2016.
