Thai Union has claimed in a court filing that restaurant chain Red Lobster owes it, along with its subsidiary Tri-Union Frozen Products, which conducts business as Chicken of the Sea Frozen Foods, nearly USD 3.7 million (EUR 3.4 million).
Thai Union, a longtime seafood supplier and former part-owner of Red Lobster, said in a filing to U.S. Bankruptcy Court in Orlando, Florida, that Red Lobster’s financial distress and “abrupt reductions of purchasing volumes caused Thai Union to accumulate a “high level” of excess inventory – valued at around USD 22.9 million (EUR 21 million).
Additionally, the Samut Sakhon, Thailand-based seafood company claims it has accrued significant costs related to raw ingredients, storage, packaging, and interest.
“For Thai Union – and frankly any supplier in the seafood industry – an inventory buildup of millions of pounds of product is particularly damaging given the limited shelf life of the product and the substantial associated costs (e.g., packaging and storage) that grow on a daily basis – not to mention the impossibility of selling these custom items to another purchaser,” Thai Union said.
In the filing, Thai Union provided details on the issues leading to the accrued costs.
Red Lobster, which operates around 570 seafood eateries, typically forecasts demand for products for six-month periods and then finalizes pricing with Thai Union for those products. Thai Union usually has 150 days of lead time to match its supply with Red Lobster’s projected demand, Thai Union said. As a result, Thai Union is required to maintain six weeks of raw material inventory in Thailand and approximately 12 weeks of finished product inventory in the U.S. to ensure sufficient and timely delivery of products during each six-month period.
“This, in turn, requires Thai Union to manage its own working capital, deploy internal resources, and coordinate production schedules on a massive scale,” Thai Union said.
Red Lobster honored its end of the supplier relationship for the majority of the years the two entities worked together, Thai Union said. However, in November 2023, after “repeatedly increasing its forecasted demand,” Red Lobster ...
