Thai Union Group Public Company Limited, one of the world’s biggest makers of canned tuna, is considering an exit from its loss-making Red Lobster unit less than three years after boosting its stake in the United States restaurant chain.
The first half of this year will be crucial in demonstrating whether management changes and an operational overhaul can trim losses at the world’s largest seafood restaurant chain, according to Chief Executive Officer Thiraphong Chansiri. Losses at Red Lobster, which hit US$9.8 million in the final quarter of last year, have weighed on Thai Union’s results that have otherwise seen growing revenue driven by its pet food and ambient seafood businesses.
While the final decision on whether to exit the Red Lobster investment has not been made, “Thai Union has never prolonged any bad businesses” and has a previously shut several unprofitable factories, Thiraphong said in an interview this week.
Red Lobster was hit hard during the early days of the pandemic as restaurant closures and other virus measures kept customers away, but business has since been stymied by rising costs of raw materials and labour. The $900 billion US foodservice industry is struggling with a severe worker shortage, with some companies not able to recruit enough employees even after boosting pay and benefits.
An American flag flies past Darden Restaurants Inc. Red Lobster signage displayed outside of a location in Clarksville, Indiana. (File photo: Bloomberg)
Thai Union had last year rolled out a series of measures to try and ease pressure for the restaurant chain, installing new management, raising prices of its dishes and implementing some cost cutting, said Thiraphong. It also said last year it would guarantee a portion of Red Lobster’s credit facility up to $65 million.
The Thai seafood giant in 2016 paid $575 million for a 25% stake in Red Lobster plus preferred stock that can convert into a further 24% shareholding and bought another 13.7% of common equity interest in 2020. The company also owns the Chicken of the Sea and John West brands.
Thai Union shares have dropped about 13% this year, compared with an almost 4% decline in Thailand’s benchmark stock index and a 2% fall in a gauge of food and beverage firms.