Red Lobster’s ‘Endless Shrimp’ Sinks Profits By $11.3 Million
In an attempt to increase customer engagement in 2023’s third and fourth quarters, Thai Union, the parent company of Red Lobster, decided to launch a new promotion. For just $20, customers could enjoy all-you-can-eat shrimp. What seemed like a simple and effective way to spur revenue, ultimately resulted in the exact opposite.
The $20 all-you-can-eat shrimp deal has actually been a Red Lobster tradition for over 18 years. This past June, convinced of its viability, the company decided to make it a permanent menu fixture.
“We knew the price was cheap. But the idea was to bring more traffic in the restaurants,” Thai Union CFO Ludovic Garnier said on a recent earnings call.
The plan worked better than expected, as customers rushed came in droves to take advantage of Red Lobster’s “Ultimate Endless Shrimp,” for just $20. Surprisingly, this year’s third quarter earnings report revealed that the chain lost roughly $11 million thanks to the deal. The company simply didn’t foresee the deal becoming as popular as it did.
While traffic increased 2% compared to last quarter, and 4% compared to the previous year, revenue sharply declined. “On this promotion, we don’t earn a lot of money. At $22 we don’t. The idea was to bring some traffic,” Garnier added.
The Ultimate Endless Shrimp deal is now considered one of the chain’s most iconic promotions in history. That said, without some adjustments, merely traffic isn’t enough to justify its place as a permanent menu item. In response, Red Lobster has been incrementally increasing the price; first to $22, and now to $25.
“We need to be much more careful regarding, what is the entry point? And what is the price point we’re offering for this promotion,” Garnier said.
