Fresh off a recent deal to helm a new ownership consortium of Red Lobster, Bangkok’s Thai Union is hoping to steer the American seafood restaurant chain to calmer waters.
Since Thai Union first invested in Red Lobster in 2016 with a 25% stake that has grown to 49%, the restaurant chain has struggled, especially under the pandemic, with loan charges and high rental rates but also with high marketing costs, a shift in casual dining tastes and the need to vary its menu. But as majority owner Golden Gate Capital signalled its desire to exit the business, Thai Union has stood firm, helping to bring in new investors that include a 15% management stake and a 36% stake for a consortium of Asian-based investors with restaurant experience.
As one of the largest seafood companies in the world, Thai Union naturally sees the appeal of continuing to supply the restaurant chain. But CFO Joerg Ayrle also tells Campaign Asia-Pacific that the recent underperformance puts the stakeholder in a position to be able make more changes to unlock significant brand equity and eventually grow the brand in Asia.
“Red Lobster is a very iconic brand in the United States, the largest seafood retail brand in the world," Ayrle says. "And we feel it has a very, very strong appeal to consumers around healthy dining and healthy living. What we like is this very strong sustainability value base and iconic brand concept, and we’d like to continue that.”
But new financial pressures, especially under Covid, mean that Red Lobster first has to be smarter with its marketing spend. “During this crisis, we felt the opportunity to make a real major shift," Ayrle says. "We were spending probably two and a half times what our competitors were on marketing."
While typical restaurant chains may spend around 2% of revenue on marketing, Red Lobster adspend was running at about 5%, largely because its sales were based around six or seven annual events like Lobsterfest and Endless Shrimp, which required heavy mass promotion, often through expensive national TV campaigns.
“We've radically changed the concept, moving away from a series of six or seven large events spread over a year that are that are fully advertised to a concept where you embrace very intimate digital media through social-media channels,” Ayrle says, noting marketing costs have returned closer to 2% of revenue and have saved about $70 million annually. “We’ve become very digitally transformed and social media-focused with much more focus on our actual users and guests. So this national TV type of adspend is now replaced with something much more targeted.”
Ayrle notes this type of targeted digital adspend is much more in line with restaurant marketing in Asia, where communications rely more heavily on local chat groups, F&B sites and restaurant reviews to promote individual restaurant locations. In Asia, Red Lobster has a smattering of about 20 restaurants (half in Japan and the rest in Malaysia, Greater China, Philippines and Guam).
“We believe this [footprint] may be a good start,” says Ayrle. He notes that in the current period under Covid, immediate growth is unlikely, but believes real synergies will effectively make sense once the brand can ramp up in this growth region. Japan has done an excellent job of localising the brand to suit Japanese tastes, he adds, while the Philippines and Greater China markets have good growth potential. “If you’re talking about growth in Asia in the next four or five years I hope we do target 100+ locations.”
While Ayrle says he doubts there will be major new marketing funds committed for agencies in Asia soon, he says he does see the potential for more project-based work. While some of Thai Union’s global brands (Chicken of the Sea, John West) have produced some iconic campaigns, especially in Europe, most marketing work for its seafood brands in Asian markets (King Oscar, Sealect, Fisho) is done in-house, as most campaigns lack the scale needed for agency involvement.
The rise of a major casual dining chain in the region, however, could potentially change that in future.