Getting out of the Red - Red Lobster's Turn Around?
Ever since the NY Times wrote an article back in February on the eroding middle class effecting major restaurant chains, I've been interested in this phenomenon. How do companies survive and even shift their business towards the growing upper class without neglecting and even disappointing their base? Interestingly enough, many companies catering to the middle class were founded on the very principal of bringing that product to the masses - whether it was coffee (Folgers) or seafood (Red Lobster). What was once a luxury is now attainable. But over the last few decades, it wouldn't be a stretch to say many businesses have taken advantage of their middle class customer, sacrificing quality for cost, focusing heavily on promotions and hoping a gimmick would get people through the door. So beloved brands have become just another cheap deal - quantity over quality. With the conversation shifting from "I got this at X" to "I got this at X% off." Brands have fallen into a price war arms race, lowering the value of their products and brand. What once was a semi-annual special trip to a restaurant may now be a regular, monthly routine. Or once cherished clothing is now discarded with the seasons. Where has this gotten us? Americans are now more in debt, overweight, and it's safe to assume based on the rise of the self-storage industry, have more stuff than ever. Companies are struggling to keep up with customer quantity demands, hurting the environment and navigating murky labor practices as they continue to cut costs.
While they're struggling, a counter-trend is rising. Fast food is being out run by fast casual with sustainability-focused companies like Chipotle leading the charge. Even McDonald's has decided to rebrand. Online retailers focused on sustainability or ethically sourced materials like Zady, Accompany, Everlane and Warby Parker are popping up every day. And trendsetters like Millennials are shifting their spending - focusing on pure utility rather than the emotional benefits that come from owning a brand. For instance, car sharing companies have been proven to displace car sales. On a smaller scale, the growing number of subscription coffee services and even ingredient delivery services like Blue Apron show that people are choosing to forgo the prestige of eating and drinking out in order to save money - but they still want a high quality experience.
What do I predict will happen when brands like Red Lobster go back to their roots and offer the high quality experience they once did? First, they'll attract a whole new customer - the upper middle to upper class who may have even had positive associations with the brand from their childhood. Red Lobster may lose customers who were driven by discounts and deals but most importantly, their core customer - a true advocate of the brand - may learn to shift their budgets. What was once a cherished, special meal will become a special, occasional meal once again. Bringing Red Lobster out of the red.