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$50 MIL IN ADS BACK MAKEOVER AT RED LOBSTER;CHAIN BATTLES SLIDING SALES WITH YOUTHFUL PUSH, MORE EXOTIC MENU

By Published on .

Darden Restaurants is giving its aging Red Lobster chain a face-lift, overhauling everything from look, logo and positioning to pricing and menu offerings.

The whole package, testing now in four markets, will go national by the end of this month-heralded by an estimated $50 million ad campaign.

While seafood and casual dining remain two compelling trends in restaurants, Red Lobster isn't keeping pace. Restaurant industry consultant Technomic reported the $1.8 billion chain, spun off from General Mills in 1995, slipped to 13th place that year from No. 12 a year earlier, with sales up only 2.5%.

SAME-STORE SALES DROP 5%

The current picture is even worse, said Prudential Securities analyst Janice Meyer, who estimates same-store sales this year are down 5%.

"The big issue is that 10 years ago, casual dining with tickets of $8 to $10 [per meal] was hot at places like Ruby Tuesdays and Chili's," she said. "But at $10 a pop, they couldn't afford to serve fish."

New chains such as Outback Steakhouse and Macaroni Grill are averaging $15 to $20 tickets and serving fish, and have "chipped away at Red Lobster's share."

Industry observers note that Red Lobster patrons are skewing older, with the chain attracting more than its fair share of seniors. For that reason, Red Lobster's new image will have a more youthful look and feel.

SPICING UP THE MENU

And the menu, heavy on standards such as fried shrimp and whole lobster, will be augmented by more exotic seafood dishes, such as Cozumel Shrimp, Hickory Glazed Salmon, Jumpin' Jambalaya, Mussels Marinara and Stuffed Mushrooms. The price tag will drop to $10 or less for 15 entrees.

In Florida, one of the markets where the new program is being tested, the restaurants have been redecorated with a "wharfside" look and piped-in music changed to a contemporary beat. Younger-skewing drinks have been added, such as Bahama Mamas, while six new private-label beers are lined up behind the bar, including one called Red Claw.

"The drink program is being unveiled to increase the low alcohol component, which stands at 7% to 8% of sales," Ms. Meyer said. "Many other casual dinnerhouses are 50% to 100% higher than that."

TESTIMONIAL CAMPAIGN

A hefty portion of Red Lobster's $82 million in measured ad spending will be devoted to the repositioning campaign.

Unlike most of the chain's ads, which tend to focus on the deal-of-the-month, the new TV campaign from Grey Advertising, New York, is said to be testimonial-style, featuring customers enthusiastically talking about how good their overall dining experience was at Red Lobster.

`BEYOND PROMO EVENTS'

A Darden spokesman wouldn't comment on the program, except to say the intent of the advertising is to focus "beyond promotional events."

Red Lobster's advertising budget may increase behind the new program. Ms. Meyer said Darden-now that it is no longer a part of General Mills-is de-emphasizing couponing at Red Lobster, and may shift some of that money into media support.

LESS COUPONING

"Red Lobster spends almost 8% of sales on marketing, of which couponing accounts for 1 to 3 percentage points," she said, totaling $20 million a year. The plan now is to move some of that coupon money into either restaurant refurbishment or media advertising.

"The [couponing] budget is extremely high in the casual dining niche," she said."Red Lobster is not Cheerios."

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