Red Lobster's new CEO questioned the company's purchasing processes, including from owner and seafood supplier Thai Union.
Hollis Johnson/Business Insider
Red Lobster didn't go bankrupt just because of too much endless shrimp.
But the company's CEO faulted owner and key seafood supplier Thai Union for its role in the shrimp debacle — and in Red Lobster's trajectory — in a filing on Sunday.
Jonathan Tibus, a turnaround expert who took the CEO job in March, wrote that Red Lobster had long bought much of its shrimp from owner Thai Union.
"I understand that Thai Union exercised an outsized influence on the Company's shrimp purchasing," Tibus said.
He said that Red Lobster executives objected to then-CEO Paul Kenny's May 2023 plan to add $20 unlimited shrimp to the menu permanently in May 2023. But Kenny forged ahead, a decision that cost Red Lobster $11 million in operational and financial expenses, he added.
While unlimited shrimp boosted traffic to the chain, profits suffered as customers took advantage of this low-margin deal.
The relationship with Thai Union "strained" Red Lobster's supply chain, and Kenny circumvented his company's normal buying processes, per Tibus. Kenny axed two shrimp suppliers "in apparent coordination with Thai Union and under the guise of a 'quality review.'"
As Red Lobster doubled down on unlimited shrimp, its supply chain was strained, "resulting in major shortages of shrimp," Tibus said.
Despite Red Lobster's dire straits, Thai Union has not offered additional financial support, per Tibus. He wrote that Red Lobster's debtors are investigating the relationships among Kenny, Thai Union, and Red Lobster.
Thai Union did not respond to a request for comment.
Red Lobster is perhaps best known for the all-you-can-eat shrimp promotion.
In an earnings call last November, Ludovic Garnier, the finance chief of Thai Union, told investors the promotion was "one of the key reasons for the losses we generated" in the third quarter of 2023.
As BI reporter Emily Stewart wrote earlier this month, the problem was never just shrimp: "The brand has been plagued by various problems — waning customer interest, constant leadership turnover, and, as has become a common tale, private equity's meddling in the business."
On Sunday, the seafood chain said in a statement that it had filed for Chapter 11 bankruptcy. Red Lobster said its restaurants will "remain open and operating as usual during the Chapter 11 process."
The development came just a week after it said it was closing over 50 branches in the US.
