Red Lobster's Iconic Endless Shrimp Deal Faces Unexpected Challenges
In an attempt to combat the usual slowdown during the third and fourth quarters, Red Lobster's parent company, Thai Union, devised a simple plan—a $20 promotion allowing customers to indulge in unlimited shrimp. While this promotion had been a seasonal tradition for over 18 years, the company decided to make "Ultimate Endless Shrimp" a permanent fixture on the menu in June.
The intention was clear: attract more customers to the
restaurants with an enticingly low price point. However, as revealed in the
recent third-quarter earnings call, the plan exceeded expectations, resulting
in an unforeseen $11 million loss for the seafood chain.
Thai Union CFO Ludovic Garnier admitted, "We knew the
price was cheap. But the idea was to bring more traffic into the
restaurants." The promotion allowed guests to kick off their shrimp feast
with two choices, and from there, they could continue ordering from a tempting
selection, including coconut shrimp, linguini alfredo, and grilled shrimp
skewers.
The strategy did succeed in boosting traffic, with a 2%
increase compared to the previous quarter and a 4% increase compared to the
previous year. However, the company didn't anticipate the overwhelming
percentage of customers opting for the "Ultimate Endless Shrimp"
deal.
Garnier acknowledged during the earnings call, "On this
promotion, we don't earn a lot of money. At $22, we don't. The idea was to
bring some traffic." Despite becoming one of Red Lobster's most iconic
promotions, adjustments are now necessary to maintain its presence on the menu.
To address the unexpected surge in popularity, Red Lobster
has opted to incrementally raise the prices on the deal. Starting from $20, it
increased to $22, and now it's stabilized at $25. Garnier emphasized the need
for a more strategic approach in determining the entry and price points for
such promotions.
"Increasing prices incrementally allows us to be much
more careful about the entry point and the price point we're offering for this
promotion," Garnier explained.
As Red Lobster navigates the challenges posed by the
unexpected success of the "Ultimate Endless Shrimp" deal, the company
aims to strike a balance between attracting customers and maintaining
profitability. The evolution of this iconic promotion serves as a testament to
the delicate art of pricing strategy in the competitive landscape of the
restaurant industry.
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