How global seafood giants break up red shrimp

How global seafood giants break up red shrimp

When Seafood Conglomerate Group’s Thai Union Group becomes Red Lobster’s leading shareholder in 2020, gaining 49% control of the chain, Lobster Red workers are assured Thai unions will not interfere with key decisions.

The Thai union will “not be involved in Red Lobster’s day-to-day operations, including its supply chain standards and processes,” according to a document titled “Seafood Supplier Points” seen by CNN approved by Top Thai Union and Red Lobster Executives.

“We intend to maintain relationships with all current seafood suppliers,” the spokeswoman said.

They promise not to last.

By 2022, representatives from Thai Union in Thailand, whose $4 billion empire includes brands such as Chicken of the Sea and John West Foods, are embedded in Red Lobster’s Orlando headquarters, serving in top roles and directing the largest seafood restaurant chain in the world.

“We are more deeply involved in the management of Red Lobster,” Thai Union Finance Chief Ludovic Garnier said on an analyst call in November 2022.

Now, Red Lobster is drowning in the supply of shrimp supplied by Thai Union. Red Lobster filed for Chapter 11 Bankruptcy Sunday, and it plans to sell its business to its lenders. Instead, Red Lobster will receive funding to stay afloat.

Thai Union’s disastrous decision prompted the downfall of the pioneer chain, according to 13 former Lobster Red executives and senior leaders in various business areas and analysts. All but two former Lobster Red employees spoke to CNN on condition of anonymity because of either a non-disclosure agreement with the Thai union; Fear that speaking up will harm their career; Or because they don’t want to affect deferred compensation from Red Lobster.

Thai unions earlier this year blamed the Covid-19 pandemic, as well as a “sustainable wind industry, higher interest rates and rising material and labor costs” for Red Lobster’s struggles.

In a statement to CNN, Thai Union said it “has been a supplier to Red Lobster for more than 30 years, and we intend for that relationship to continue.” The bankruptcy process “will allow Red Lobster to restructure its financial obligations and realize its long-term potential in a better operating environment,” the company said. The Thai union did not respond to CNN’s questions about the specific allegations raised in this story.

Former Lobster Red employees say that despite the pandemic, inflation and rent costs affecting Red Lobster, Thai Union’s uncertainty was a significant factor in Red Lobster’s decline.

“It was miserable working there for the last year and half I was there,” said Les Foreman, vice president of the West Coast Division who worked at Red Lobster for 20 years and was fired in 2022. “They had no idea about running a restaurant company. in the United States. ”

Thai unions insist on control
At Red Lobster Headquarters, employees pride themselves on a culture of loyalty and low turnover. Some employees have been with the chain for 30 and 40 years.

But as Thai Union installed executives at the chain, dozens of veteran Red Lobster leaders with deep knowledge of the brand and restaurant industry were fired or resigned in quick succession. Red Lobster ended up having five CEOs in five years.

Thai Union CEO Thiraphong Chansiri visited Red Lobster headquarters in 2022 and toured restaurants across the country. He brought a Feng Shui consultant named Angel to Orlando, a former senior leader at Red Lobster headquarters told CNN. Consultants determined that the executive office in Orlando was “Bad Feng Shui and no one should use it,” a former leader told CNN. The executive office sits empty.

Former Red Lobster employees describe a toxic and demeaning environment as Thai-appointed executives step down at headquarters and CEO while Paul Kenny eventually takes over the chain in 2022. Kenny, former CEO of Australia’s Minor Food, one of the largest casual dining in Asia And the quick service restaurant, is part of an investor group led by Thai Union that acquired Red Lobster.

Kenny criticized Red Lobster employees at meetings and made disparaging comments about them, according to a former Red Lobster leader who worked closely with Kenny. Commenting on women’s weight at Red Lobster’s 2022 annual conference in Dallas as he walked on stage to accept an award, Kenny said, “We need to start a training program at this company,” another Red Lobster executive told CNN.

Kenny did not respond to CNN’s request for comment on the allegations.

Under Kenny, Red Lobster also cut two longtime shrimp suppliers and its competitor to Thai Union – in order to buy more shrimp from Thai Union at a higher cost, according to Red Lobster’s bankruptcy filing. Kenny’s decision came “in clear coordination with the Thai Union and under the name ‘Quality Review,'” Red Lobster said.

These changes culminated in a $20 endless shrimp promotion in 2023 that will return to haunt Red Lobster.

“Thai unions exert outsized influence over the company’s shrimp purchases,” Red Lobster said in its bankruptcy filing. Red Lobster said it was “investigating whether Mr. Kenny’s decision-making process circumvented the company’s normal supply chain and demand planning.”

The Thai union told CNN that Red Lobster’s allegations in the bankruptcy filing are “without merit,” and that the company is looking forward to a “full representation of the facts.”

Red Lobster also delayed investment in dining room upgrades, raised prices and cut labor under Thai Union, the former executive and operations leader. This decision drove away customers and cut into Red Lobster’s sales. Red Lobster’s annual customer count has declined by 30% since 2019, Red Lobster said in its bankruptcy filing.

Paul Kenny stepped in
Red Lobster was started in 1968 by Bill Darden, the architect of the Casual Dining Revolution in America. General Mills quickly bought Red Lobster and in 1995 spun off the chain into a new company, Darden Restaurants, named after its founder.

In 2014, Darden sold Red Lobster to Golden Gate Capital, a private equity firm, for $2.1 billion. To help fund the deal, Red Lobster spun off its real estate. The arrangement hurt the red lobster because it was stuck with leases it could no longer afford while the business struggled.

Two years later, Thai Union took a $575 million minority stake in Red Lobster. In 2020, Thai Union expanded that stake, leading a group of investors to buy Golden Gate Capital and acquire Red Lobster.

In the first half of 2021, Red Lobster posted an operating profit, and Thai Union touted Lobster Red’s strength on a call with analysts and the company’s presentation.

“Red Lobster’s recovery continues amid the pandemic,” Thai Union said in a quarterly earnings presentation in August 2021. There was “clear improvement in Lobster Red’s operations.”

Red Lobster is hiring 26,000 workers from January to August 2021, Thai Union said in the presentation, and appointed CEO Kelli Valade. Valade brings in a new leadership team, including a new chief financial officer, chief marketing officer and chief information officer.

But Kenny, then a red shrimp board member, soon began to exercise more control.

In early 2022, Kenny began visiting Red Lobster headquarters more often and touring restaurants, a former Red Lobster employee who worked closely with Kenny said.

At a tense board meeting in late March 2022, Kenny disagreed with Valade that further investment was needed at Red Lobster, according to former Lobster Red leaders. He chastised Red Lobster’s management team, which included three recently hired Valade executives, this person said. Within 48 hours, Valade resigned, just eight months into his term. Another Lobster Red board member with decades of experience running casual dining restaurants in the United States resigned a day later.

Valade was appointed Denny’s CEO two months later. He did not respond to CNN’s request for comment.

Bad cuts
Kenny was initially described in the press release announcing Valade’s resignation as a “liaison” between Red Lobster’s leadership and the board of directors “during this time of transition.”

But, at the direction of the Thai Union, Kenny became interim CEO, according to Red Lobster’s bankruptcy filing.

Within months of Kenny taking over, Valade’s leadership team and other veteran leaders left. In July 2022, the Chief Operating Officer and six VPs of Operations overseeing the restaurant were suddenly fired shortly before Red Lobster’s General Manager Conference.

Kenny appointed a Thai Union Frozen seafood manager, Trin Tapanya, as Red Lobster’s chief operating officer overseeing the restaurant. Tapanya has no experience running a restaurant. He did not respond to CNN’s request for comment.

Other Thai Union representatives also become closer throughout Red Lobster’s supply chain, finance, operations and strategy.

Under Kenny, changes to restaurant operations and menus alienated customers and staff and hurt sales. Red Lobster began charging for side salads for the first time, angering some customers.

“When you spend $43.99 on a meal, a salad should be part of it,” said one customer recently on Facebook. “Texas Roadhouse doesn’t charge extra for a side salad. Red Lobster was my favorite place to eat, but not anymore.”

The chain began leaving the tails on shrimp in pasta and eliminating stir-fry stations in the kitchen to save on labor costs, according to a different former Lobster Red employee.

It also squeezed Red Lobster’s servers, going from servers covering three tables to 10 and removing hosts at the entrance during lunch hours. The Thai union said at the time it was to improve customer service, but former Red Lobster employees say the restaurant’s staffing changes are taxing.

The Overstretched restaurant staff has fewer managers and cooks than ever, said Barry Fulghum, who started as a dishwasher at Red Lobster in the 1970s and worked his way up to director of operations, retiring last year.

“There will be times when we will have one or two people working in the kitchen,” he said. “What those chefs did was amazing given the staffing situation they were in.”

Remove old suppliers
Meanwhile, the Thai Union is taking a bigger role in Red Lobster’s supply chain decisions, despite promising in 2020 that it won’t interfere.

Red Lobster has spent decades developing a variety of suppliers to buy from at competitive prices and reduce the risk of becoming overly dependent on any single supplier.

The Thai union blew it.

Red Lobster workers say they are being pressured by Thai Union representatives to buy more seafood from the Thai Union. Thai Union representatives also began sitting in on meetings between Red Lobster and seafood suppliers, said one former Lobster Red employee who witnessed these conversations. Thai Union was a direct competitor of other seafood suppliers, and suddenly had intimate access to their products, prices and strategies.

“Our suppliers are really upset that [Thai Union Representatives] are in a meeting with them,” this person said.

Shrimp dishes are also a bigger focus of Red Lobster’s menu under Thai Union, which is a big shrimp supplier for Red Lobster.

“Every promotion is shrimp-centric,” this person said.

Endless shrimp
Then came the endless shrimp.

The endless shrimp has been a successful limited-time promotion at Red Lobster for nearly 20 years. But last summer, Red Lobster turned the $20 “Ultimate Endless Shrimp” into a permanent menu item.

Kenny was warned by Red Lobst lead

er that $20 is too cheap to make a profit, according to a former employee who witnessed this conversation. But Red Lobster went ahead, turned it into an everyday deal in June 2023 and pushed the promotion hard.

(Kenny’s decision was met with “significant pushback from other members of [the company’s] management team,” Red Lobster said in its bankruptcy filing.)

“We have a very bold proposition for consumers in the United States. It’s $20, so it’s really affordable,” Thai Union Finance Chief Ludovic Garnier said on an earnings call in August 2023.

But the move is back.

Customers sit at the table for a long time, eating course after course of shrimp. Service is slow and wait time increases.

Red Lobster lost $11 million following the deal, a condition of its bankruptcy filing.

Endless shrimp is an embarrassment for Red Lobster, which is syndicated on Central’s “The Daily Show” and social media. To former Lobster Red employees, it’s the latest sign Thai Union isn’t fit to run the chain.

Thai Union announced in January it was divesting itself from Red Lobster and taking a $530 million loss on its investment. A month later, Thai Union CEO Chansiri said the company wanted to sell the chain.

Red lobster, he said, “has been done [and].”

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