Thai Union considering exit from beleaguered Red Lobster

Thai Union Group is reportedly considering an exit from Red Lobster as the global restaurant chain continues to drag down the company’s profits.

The Bangkok Post reported the Bangkok, Thailand-based canned tuna giant is considering dumping Red Lobster after it invested millions into the chain in 2016, then was part of a consortium that acquired it outright in 2020. Since then the U.S.-based seafood chain has dragged on the company’s profits – its Q4 2022 financial report put losses from Red Lobster at THB 456 million (USD 13.1 million, EUR 12.2 million) for the quarter, dragging Thai Union’s net profit lower despite sales growth.

That loss was also higher than the THB 256 million (USD 7.3 million, EUR 6.9 million) the chain shed in Q4 2021, and the company’s preferred shares interest in Q4 also decreased to zero, a decline from THB 319 million (USD 9.1 million, EUR 8.6 million) in Q4 2021.  

After the multiple years of losses, Thai Union CEO Thiraphong Chansiri is hinting that the company is considering an exit from Red Lobster, and the first half of the year will decide whether the company dumps the beleaguered chain. 

“Thai Union has never prolonged any bad business” Chansiri told The Bangkok Post.

He said a final decision on the chain has not yet been made.

The exit would be a reversal from the company’s prior stance on Red Lobster. Thai Union promised to guarantee as much as USD 65 million (EUR 60 million) of Red Lobster's outstanding credit facility in August 2022. 

“The board of directors has considered and agreed to approve the guarantee … to support and enhance RLMH liquidity management capabilities,” a statement from the company’s board of directors said at the time.

An exit would also come just months after Red Lobster launched a new frozen seafood line as part of a multi-pronged turnaround plan for the restaurant chain.

But Thai Union’s share price has dropped 13 percent in the past year, significantly above the 4 percent decline experienced by the overall stock index on the Thailand exchange, with Red Lobster sitting as the company’s loss-leader. 

Red Lobster has faced a number of challenges, including a continued lack of a chief executive officer after former CEO Kelli Valade resigned from the position just eight months into the job in April 2022. That swift departure was later followed by Red Lobster Chief Financial Officer David Schmidt announcing he was leaving in September 2022. The company continues to be in a difficult place in the foodservice market.    

In a 11 March statement sent to SeafoodSource, Thai Union said it was confident its turnaround plan for the franchise will eventually bear fruit.

“Regarding the recent questions on Thai Union’s strategic investment in Red Lobster, Thai Union would like to reconfirm that Red Lobster is still considered as a valuable opportunity for Thai Union," it said. "In the past few months, Red Lobster’s business performance has been improving and in line with expectations in terms of sales growth, cost of goods sold, and labor costs. This is a result of its continual focus on the business turnaround with initiatives including new menu offerings, ensuring value is delivered to customers, cost controls, and targeted marketing campaigns. Therefore, Thai Union is fully committed and supportive of Red Lobster on its business turnaround plan. The company looks forward to seeing the positive outcome from Red Lobster’s focus on marketing strategies, human resources development, product and service improvement.”

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