Thai Union Group CEO Thiraphong Chansiri said his company isn’t expecting to earn much from the sale of Red Lobster.
Chansiri said on a 19 February investors’ call and at a subsequent shareholder meeting he didn’t expect any one-time gain from a sale of the casual dining chain, which has around 560 locations in internationally, the bulk of which are in the U.S.
Thai Union announced in January 2024 it aims to pursue an exit from its strategic partnership and minority investment in Red Lobster Master Holdings, which it has held since 2016. The company owns around 38 percent of Red Lobster after upping its investment in 2020, and it owns preferred stock it can convert into another 24 percent shareholding, though that seems unlikely given its move to divest.
“Red Lobster is done and over with," Chansiri said. "[We’re] just waiting for the sale to happen but we do not expect any significant value to be gained."
Chansiri said Thai Union plans to hire an outside firm to run the sale process, which he said should take three to four months.
Red Lobster cost Thai Union more than USD 22 million (EUR 20 million) in losses in 2023, surpassing the company’s forecast by USD 3 million (EUR 2.7 million). That included a USD 12.5 million (EUR 11.5 million) operating loss in Q4 2023, which Thai Union blamed on higher costs and interest rates.
Chansiri clarified that Thai Union’s only direct supply connection to Red Lobster is shrimp, and that “the value is not that high.” He said following the divestment, that product will be redirected to other buyers.
“The value is … not that significant because we are only selling the value-added items to them," he said. "According to our plans, once we exit Red Lobster, we will be able to sell to other brands more easily."
Bloomberg Intelligence analysts Lisa Lee and Lea El-Hage predicted in a 16 February analysis that Thai Union’s earnings growth could recover in 2024, as the company sees better sales of canned, frozen, and chilled seafood. Thai Union also owns Chicken of the Sea, John West, Petit Navire, King Oscar, and Sealect brands, as well as the i-Tail Corp. pet food business.
“Capacity expansion will help, as gross profit margin stabilizes to 17 to 18 percent from cost-cutting efforts, lower raw-material costs, new product launches and price increases,” they wrote.
At its shareholding meeting, Thai Union won approval for changes to its interest-coverage ratio and dividend-cap restriction on several tranches of notes, a request that stemmed in part from the one-time THB 18.5 billion (USD 530 million, 481 million) impairment charge it took in Q4 2023 related to its Red Lobster write-down.
Thai Union CFO Ludovic Garnier described Red Lobster’s performance as “okay” but said it struggled for profitability even after Thai Union institute a more involved managerial approach that involved changes to the chain’s menu and operations.
“We are not happy with this decision [to divest], but I think it shows that we took the right decisions to move away and to exit from the business,” he said.
Chansiri acknowledged his experience with Red Lobster had left a “big scar” on him and Thai Union, and expressed a desire to move away thinking about the chain making light of dietary restrictions many observant Christians adopt for Lent.
“Other people stop eating beef. I’m going to stop eating lobster,” he said, according to Restaurant Business Online.
The opposite will be true for winners of a contest launched by the beleaguered chain on 20 February. Red Lobster said in a press release it will choose 150 diners to indulge in a culinary experience includes a maximum of a dozen 1.25-pound Maine lobsters. The contest is designed to promote Red Lobster’s Lobsterfest promotion, which features five newly available dishes featuring lobster, including Crispy Lobster and Shrimp Stack and Lobster Lover’s Dream.
The promotion comes even after Red Lobster suffered a significant financial hit from its Ultimate Endless Shrimp promotion in 2023, which it underpriced, costing the company millions of dollars.
