How Red Lobster’s misguided endless shrimp promotion drove it into bankruptcy

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BY Nathaniel Meyersohn

Last summer, Red Lobster made $20 endless shrimp a permanent menu item.

Endless shrimp was a successful annual limited-time offer for Red Lobster for 20 years. But Red Lobster’s latest major shareholder, Thai Union, a Bangkok-based canned seafood company, saw the promotion as a way to sell off the mountains of shrimp it was catching and turned it into an everyday item. (Thai Union became Red Lobster’s largest investor in 2020.)

The change cost Red Lobster $11 million.

Red Lobster filed for bankruptcy Sunday, and the bankruptcy filing sheds new light on Thai Union’s role in the endless shrimp mishap. Red Lobster said it is investigating the circumstances of that promotion, which Red Lobster management opposed.

Under a CEO appointed at the direction of Thai Union, Red Lobster eliminated two of its breaded shrimp suppliers, leaving Thai Union with an exclusive deal to provide shrimp for the chain, the filing said.

That led to higher costs, and it did not comply with the company’s typical decision-making process for picking suppliers based on projected demand, according to the chain’s filing.

“This decision created both operational and financial issues for [Red Lobster]… saddling the company with burdensome supply obligations” to Thai Union, Red Lobster said in the filing.

Thai Union did not immediately respond to CNN’s request for comment.

Endless shrimp alone didn’t doom Red Lobster. The American poster child for seafood was dragged down by a range of factors, say former leaders at the chain and restaurant analysts — including handoffs between a mix of investors and corporate parents and Thai Union’s mismanagement.

“Certain operational decisions by former management have harmed [Red Lobster’s] financial situation in recent years,” Red Lobster said in its bankruptcy filing.

The explosive growth and popularity of fast-casual chains like Chipotle and quick-service chains like Chick-fil-A over the past two decades also squeezed Red Lobster. And years of underinvestment in Red Lobster’s marketing, food quality, service and restaurant upgrades hurt the chain’s ability to add Millennials to its core Baby Boomer customer base.

“Red Lobster was the foundation of casual dining. They had a position of power and prominence and revolutionized how American consumers eat seafood,” said Alex Susskind, a professor of food and beverage management at Cornell University, in a previous interview with CNN.