Case Study: Can Red Lobster turn the tables?
Red Lobster, the world’s largest seafood restaurant chain, is plotting a new course with a new captain at the helm. Orlando, Fla., U.S.-based Darden Restaurants’ blockbuster deal to sell the iconic brand to private equity firm Golden Gate Capital in San Francisco, which was announced in May and closed earlier this summer for USD 2.1 billion (EUR 1.59 billion), was rife with controversy as so-called activist investors sought to block the sale amid conflicting reports about the company’s financial performance.
The coming months will be crucial for Red Lobster as it seeks to boost restaurant traffic and win over seafood lovers with a renewed focus on quality seafood, plate presentation and a fresh marketing approach that gives seafood a national platform like no other. Kim Lopdrup (pictured), CEO of Red Lobster Seafood Co., which is still based in Orlando, talks about the many changes the company has in the works and why, in some cases, you don’t mess with success.
Lopdrup previously served as president of the Specialty Restaurant Group and New Business for Darden and was president of Red Lobster for seven years, during which the restaurant introduced its Today’s Fresh Fish program, wood-fire grilling and the Bar Harbor Image remodeling effort. A longtime foodservice industry veteran, Lopdrup has also steered turnaround efforts for Burger King and Dunkin’ Donuts.
He took some time from his busy schedule recently to answer questions about why the brand’s struggles may soon be a thing of the past and the importance of keeping its experienced seafood-procurement team in place.
The company/the brand:
How do you characterize the health of the Red Lobster brand at the moment? What is its future prognosis?
Red Lobster begins this new journey from a position of strength. Red Lobster is the largest seafood restaurant company in the world with 705 units in the United States and Canada, and a growing international footprint. We are the market leader with nearly a 50 percent market share in the full-service seafood restaurant segment, which represents the largest market share of any restaurant brand in any segment. Lastly, we’re the fifth-largest casual dining restaurant company in the United States with USD 2.5 billion (EUR 1.89 billion) in annual sales and average unit volumes of USD 3.5 million (EUR 2.65 million).
Our future growth plan is focused on three things: great seafood, great people, great results. At its core, the plan is about getting back to the basics of being not just the biggest seafood restaurant company — but the best.
We’re confident this approach will unlock the full potential of Red Lobster, improve guest counts near term and accelerate growth long term.
This is your second go-round with Red Lobster (formerly president from 2004 to 2011). Describe the challenge you have of not only injecting life into the brand but also focusing solely on the United States’ largest seafood chain after a few years of overseeing a more diverse portfolio of restaurants with Darden?
I chose to come back to Red Lobster as CEO. I believe in the seafood business, the Red Lobster brand, its future potential, and our talented team of 58,000 employees.
My career has spanned most segments of the restaurant industry, from QSR to casual dining to upscale restaurants. My most recent assignment leading Darden’s Specialty Restaurant Group gave me some good learning about local sourcing, food trends, and service that I know will benefit Red Lobster.
What has Red Lobster not done so well in the past few years during the chain’s struggles that can be changed rather quickly, and what improvements might take more time?
We have reversed most of the changes that hurt sales over the past several years, and guest satisfaction has already fully recovered. We have plans to introduce a new menu this year that features a number of new or improved seafood items, broadens our price range, and reduces the number of non-seafood items back to our previous level of 10-15 percent. We recently hired a terrific new advertising agency — Publicis Kaplan Thayer — that will help us evolve our creative advertising and fully leverage the digital and social space.
What doesn’t need to change?
What won’t change is our focus on developing long-term, win-win relationships with great suppliers. We need suppliers who can help us maintain our industry-leading quality and safety standards in a sustainable way. We particularly like suppliers who help us develop innovative products and work with us to maximize the efficiency of the entire supply chain, which allows us to offer superior overall value to our guests.
Red Lobster TV ads are rare instances when seafood is advertised to the general public on a national scale. Do you feel that Red Lobster has a unique ability, or even a duty, to lift the entire seafood category to a certain level of prominence?
I think Red Lobster inspires seafood lovers and enthusiasts of all ages given the quality of the seafood we serve. Our advertising is really meant to romance the dishes we create at our restaurants. We know the No. 1 reason people come to Red Lobster is to fulfill a seafood craving. If our efforts through advertising help the broader industry as a whole, we’re happy to play that role.
Attracting the “right” customer: Are you dissatisfied or concerned with the image that Red Lobster has, that it’s not upscale enough or that it’s fine-dining for the middle class?
We very much value the guests we have today and intend to serve them even better in the future. Red Lobster has a very broad guest base who come to us for both special and every day occasions. What our guests have in common is a love for great seafood. It’s important to us to provide top quality seafood that’s affordable for a variety of guests and occasions.
Casual dining chains had done extremely well for years but there are signs of weakening. What are the strengths and weaknesses of the casual dining sector and what trends look promising for Red Lobster?
Casual dining’s strength is the experience we provide. It’s a full service experience in a nice, welcoming atmosphere. At Red Lobster, we help people reconnect and spend quality time with their friends, family and loved ones. That’s important to us.
From a trend standpoint, seafood is a very healthy protein. Therefore, I think there’s an opportunity for Red Lobster to introduce more innovative dishes that are both delicious and good for you.
Was adding more non-seafood items the wrong move, or is a focus on seafood simply right for the brand?
Red Lobster exists to serve seafood lovers and our competitive advantages are all in seafood. We need to offer some non-seafood items, but they will never be big sellers.
What products are the historical drivers for your menu?
We know guests love our limited-time promotions such as Endless Shrimp, Crabfest and Lobsterfest that allow them to try new dishes and flavors that aren’t always on our menus. These promotions, particularly Lobsterfest, are also celebratory in nature, which appeals to guests who visit us for special occasions.
Our award-winning Today’s Fresh Fish menu, which we introduced back in 2007-2008, has grown in popularity. Guests enjoy being able to choose from five to eight selections of fish, including species such as tuna and swordfish, and have the fish freshly wood-grilled by one of our certified grill masters.
Do you feel that discounting hurts seafood sales, or your brand, in the long run?
We’re going to offer a variety of high-quality seafood at a broad range of price points. We’ll continue to feature coupons and special promotions, but ones that build brand equity.
You told the Associated Press that “Endless Shrimp” and “Crabfest” special promotions will remain. What are your thoughts behind that?
Endless Shrimp, Crabfest and Lobsterfest are our most popular promotions. They also feature some of the best seafood we serve and allow us to bring guests innovative dishes with great seafood they can’t prepare at home. Crabfest this year featured the Crab Lover’s Trio, which had three types of crab — king crab, snow crab legs and jumbo lump crab — all on one plate, prepared in three different ways.
Can a simple change, like plating style, make a big difference?
Looking at food presentation is one of many enhancements we’ll be making to the food and the restaurant experience over the next year. Sometimes a small change can make a meaningful difference. For instance, we recently re-plated our fresh fish and have seen an increase of fresh fish orders and higher levels of guest satisfaction.
Going high, or low, on the menu (in terms of prices) seems to be a smart strategy. Can a restaurant do well at both? What are some of the product options you see for each end of the price spectrum?
As I mentioned, we’re looking at introducing dishes across a broad range of price points. On the lower end, you’ll see things like lobster tacos — three tacos with Maine lobster meat for USD 12.99 (EUR 9.84). On the higher end, we’re looking at combination plates that are more appropriate for special meals. These plates might feature a variety of shell stock and sides, and could even be shareable for larger parties.
In regards to procurement and operations personnel, how many people who were working for Red Lobster previously stayed with Red Lobster? Are you confident that your buyers will be able to source as much quality product as the company will need? What is this transition like?
Darden had an extraordinary seafood purchasing and Total Quality team and most of that team is now with Red Lobster. The transition to being a standalone company has been very positive and I am fully confident in the seafood purchasing team’s abilities to source high-quality products for us.
Darden’s seafood buyers have decades of experience. Who is still on board?
As I mentioned, we brought over a very talented team from Darden, many of whom have worked for Red Lobster and in seafood purchasing for 10-plus years. Our head of supply chain, Nelson Griffin, comes to us with more than 20 years of purchasing and supply chain experience. He also began his career as a Red Lobster general manager so he has a keen understanding of our business and our guests. In addition, talented team members such as Joe Zhou, Mike Powers and Jennifer Keith have joined us. The team’s main objective is to source high-quality products in a sustainable and cost-effective manner for Red Lobster so that we deliver a fantastic seafood meal experience to our guests.
What can you tell me about the lobster-farming operation that Darden had begun R&D work on in Malaysia?
The lobster aquaculture project remains at Darden so we’ll let Darden answer questions about that project.
How has your shrimp-procurement changed since the onset of early mortality syndrome in Southeast Asia?
I’m not going to get into the specifics of our procurement methods, but I can say our long-standing relationships with trusted suppliers continue to benefit us and allow us to bring guests the quality seafood they expect from Red Lobster.