Seafood giant Thai Union Group is standing by its investment in US foodservice operator Red Lobster.
The Thailand-based group has issued a statement insisting it is “committed” to the “turnaround” at the Florida-based business.
Thai Union first invested in the restaurant chain in 2016, paying US$575m for a minority stake.
Its current shareholding in Red Lobster amounts to 25% of the group’s common units and 24% of its preferred units.
Last week, The Bangkok Post reported Thai Union was considering the future of its investment, quoting CEO Thiraphong Chansiri as saying the company “has never prolonged any bad businesses”.
In Thai Union’s 2022 annual accounts, the John West canned seafood brand owner booked a “share of loss” from Red Lobster “equivalent to THB1.63bn (US$47.1m)”. Thai Union said the loss resulted from the chain’s “loss from operating performance” of THB1.21bn and a “lease adjustment from accounting standard differences” of THB421.9m.
A statement from Thai Union provided to Just Food read: “Thai Union would like to reconfirm that Red Lobster is still considered as a valuable opportunity for Thai Union.”
Thai Union’s annual report said the casual-dining chain suffered from the impact of the Omicron variant of Covid-19, plus “high inflation, slowed consumer spending and threatened supply chains”.
Red Lobster runs more than 700 restaurants across the US, Canada and a clutch of other markets. It opened its first outlet in Thailand last year.
Its higher losses were a factor in the near-11% fall in Thai Union’s group net profit in 2022.
In a presentation detailing Thai Union’s 2022 financial results, the company stated Red Lobster’s “financial covenant under pressure due to continued operating challenges. Thai Union demonstrated continuous support to Red Lobster by providing in August 2022 a $65m guarantee of a portion of Red Lobster’s credit facility to strengthen Red Lobster’s financial position and ability to turnaround the business”.
In its statement today, Thai Union added: “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 labour 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.”
The chain is looking to up prices to combat cost inflation, trim expenses and introduce new menu items “to drive down COGS but remain competitive (recipes and pricing)”, the Thai Union results presentation stated.