The parent company of Red Lobster, Thai Union Group, announced earlier this month that the seafood chain suffered an unexpectedly large loss in the third quarter of the year because its $20 shrimp promotion was not very profitable, but much more popular than the company had anticipated.
“The proportion of people who chose this promotion was much higher than our expectations,” said Chief Financial Officer Ludovic Garnier.
Red Lobster has had an unlimited shrimp promotion for years, but this year it changed the offer from temporary to permanent. The goal was to increase traffic in the third and fourth quarters of the year when business tends to slow down.
Garnier said the strategy worked, attracting more customers and strengthening Red Lobster’s market share. But the demand was not as high as the company expected and, combined with the low margins of the surprisingly popular promotion, this became a problem.
He stated that American consumers are increasingly budget-conscious, given the high inflation that haunts consumers, which means they are looking for cheaper restaurants and even ordering cheaper items from the menu. This contributed to the unexpected popularity of the “Ultimate Endless Shrimp” offer.
In response, the company has been gradually raising the price of the $20 shrimp promotion to $22 and now to $25.
Source: NBC News