In 2024, the global seafood industry continues to thrive with various factors driving growth. The market is expected to increase from $236.61 billion in 2023 to $254.2 billion in 2024, with an annual growth rate (CAGR) of 7.4%.
The Asia-Pacific region is expected to achieve the highest growth due to strong demand from countries like China, Japan, and South Korea, where seafood plays an important role in eating habits. Advanced infrastructure and technology in seafood production also contribute to meeting this increasing demand.
Southeast Asia remains one of the largest seafood-exporting regions in the world. Countries like Vietnam and Thailand continue to maintain their positions in the international market thanks to product quality and advanced production processes. In the context of the U.S. banning seafood imports from Russia and the EU imposing a 13.7% punitive tariff on Russian fish products, Southeast Asian seafood products will benefit as substitute goods.
With the heat of the seafood industry, M&A has gradually become an inevitable trend since 2015. Large enterprises have offered lucrative deals to exploit their market advantages to swallow smaller businesses still struggling to expand their market. However, the promise of a "win-win" situation is not always fulfilled, leading to the increasing phenomenon of the big fish swallowing the small fish in the seafood industry. A typical example is the merger between Thai Union and Red Lobster in 2014.
THAI UNION GROUP'S ASSET-STRIPPING M&A STRATEGY - A GIANT IN THE GLOBAL SEAFOOD INDUSTRY
Background:
Thai Union Group was founded in 1977 in Thailand. After more than a decade, this company made a spectacular transformation from a small company into a global seafood supplier, ranking among the top 5 in the world (as of 2024). The success of Thai Union Group demonstrates the strong potential of the seafood industry and its fertile, dynamic market for exploitation.
Unlimited Shrimp Buffet Campaign
Red Lobster is a well-known casual seafood restaurant chain in the U.S. Thai Union had been supplying shrimp to this brand for 30 years before officially merging in 2014. Immediately after taking control, the Thai company aggressively pushed the unlimited shrimp buffet campaign to increase restaurant traffic. On the surface, the buffet campaign seemed promising to enhance the company's reputation, as shrimp orders in the U.S. market increased by 35% that same year, indicating a strong consumer preference for the product. However, Thai Union's misstep was not limiting the dining time and days the program was available, leading to a massive crisis for Red Lobster shortly thereafter.
Lack of Cultural Awareness and Consequences
The cultural gap made them unaware that Americans could consume so much that customers stayed for hours, eating hundreds of shrimp per person. The campaign caused Red Lobster to lose up to $11 million just one month after launching the program. But Thai Union Group still forced this restaurant chain to pay for shrimp purchases and reaped enormous profits directly from this loss. To this day, Red Lobster officially filed for bankruptcy in May 2024 and has never really recovered since the lobster crisis.
SEAFOOD INDUSTRY M&A: THE BENEFITS COME WITH DOWNSIDES
Benefits of the Red Lobster and Thai Union Merge
To survive in the competitive seafood industry, many seafood businesses have made strategic moves to expand their scale and seek potential partners. The M&A trend in the seafood sector is one of the effective ways to help seafood businesses restructure, expand consumer markets, diversify products and business fields, and provide momentum for seafood companies to survive the challenges.
For Thai Union, a company that mainly supplies seafood to partners, the M&A with Red Lobster helped them expand their consumer market in the U.S. and increase the company's value through food processing. This was especially advantageous when the market at that time was trending favorably for American seafood businesses, such as high liquidity, low-interest rates—below 5% per year—and particularly favorable new terms in 5-year financial loans, primarily for acquisition and consolidation deals.
M&A Traps and the Risk of Hostile Takeovers
Besides the achievements this M&A deal brought, there were also many downsides, such as forming a monopoly, and unresolved conflicts of interest. The balance of interests was not fair for both companies, but leaned entirely towards Thai Union, leading to Red Lobster's unfortunate bankruptcy.
The failure of this deal occurred for many subjective and objective reasons, including challenges from the COVID-19 pandemic, which caused disruptions in the global supply chain, increasing costs and supply shortages. Moreover, when trying to change its operations to recover from the huge losses, Red Lobster faced interference from high-level Thai staff. Lacking initiative and the ability to make independent decisions, key staff members left, leaving one of the most famous seafood buffet restaurants in the U.S. as an empty shell. In May 2024, Red Lobster officially announced bankruptcy and planned to divide and liquidate assets to compensate investors.
This case study has opened up many lessons when it comes to M&A in general and seafood industry M&A in particular:
Businesses need to understand the merger market to develop strategies that are appropriate to the culture, identity, and consumer needs.
Eliminate conflicts of interest and resolve cultural differences between the two companies immediately after the merger.
Avoid excessive interference in the operations of the acquired company.
Cooperation must be based on mutual benefit to ensure a healthy M&A environment and prevent hostile takeovers.
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