At Red Lobster, the popular seafood restaurant chain that is 36% owned by Thai Union Group, there was a promotion called Ultimate Endless Shrimp that ended up causing some unexpected issues. The Chief Financial Officer, Ludovic Garnier, recently discussed the negative impact of this promotion during a conference call.
The promotion allowed customers to enjoy unlimited shrimp for a fixed price of $20. While the intention behind this promotion was to attract more customers to the restaurants, it ended up being too successful. In recent times, $20 was considered a very low price for such a deal, and as a result, the promotion attracted an unexpectedly high number of customers.
The traffic in the restaurants increased by approximately 2% compared to the second quarter and by 4% compared to the same period last year, even though this time of the year is traditionally less busy for the restaurant industry. The promotion proved to be so effective that Red Lobster managed to gain market share from its competitors.
However, the high proportion of customers choosing this promotion was not initially expected. It became clear that customers visiting Red Lobster were primarily looking for a great value proposition. Although the promotions generated less profit at the $20 price point, it was still deemed worthwhile due to the increased traffic and revenue.
To address this unexpected success, Red Lobster decided to raise the price of the Ultimate Endless Shrimp promotion. First, they raised it to $22 and later to $25. Despite the price increase, management believes it is still a powerful promotion that should be retained on the menu. However, more caution will be exercised in determining the entry points and pricing strategy for future promotions.
Even though Red Lobster is projected to incur losses of 700 million Thai baht ($20 million) in 2023, it is worth noting that this is an improvement compared to the 1.2 billion baht loss they experienced last year. The company remains optimistic about their ability to manage and improve the financial performance while maintaining appealing promotions for their customers.