Oil Spill Economics Trickle Down as Red Lobster Chain Stops Serving Oysters

On Monday the Gulf oil spill claimed another victim as Red Lobster, the popular Orlando-based seafood chain, announced that oysters will no longer be on the menu. Last week, the restaurant's supplier -- AmeriPure oysters -- closed its plant, citing a dwindling supply of the tasty shellfish.

Of the 660 Red Lobster locations nationwide, 435 -- roughly two thirds -- carry oysters. The chain's owner, Darden Restaurants (DRI), will continue to serve oysters at its premium Capital Grille restaurants; unlike Red Lobster, Capital Grille doesn't use Gulf oysters.

The big loser in this mess is AmeriPure. The $20 million company, which had to rebuild after being devastated by Hurricane Katrina, now finds itself crippled by BP's oil spill. In addition to damaging many oyster beds, the oil company has undermined the seafood industry by monopolizing the available fishermen. BP (BP) is paying inflated wages for boat crews, inspiring many of Louisiana's oystermen to hang up their nets in favor of oil booms. The labor drain has translated into a further decline in oyster harvests.

Supplier Fought for Survival

For AmeriPure, Red Lobster represented a high point in its fifteen year effort to bring branded oysters to America's tables. Founded in 1995, the Franklin, La., company has had to fight against a lingering perception that Gulf Coast oysters are dangerous. Every year, approximately fifteen people die from eating raw oysters that are contaminated with dangerous bacteria; most of the tainted bivalves come from the Gulf. Late last year, the FDA announced plans to ban the sale of oysters that are harvested from the Gulf during the summer. East Coast cold-water oysters, which cost about three times as much as Gulf oysters, are far safer.

AmeriPure owners John Tesvich and Pat Fahey have developed a proprietary hot and cold water bath process that, they claim, ensures the safety of their oysters while preserving their flavor. To promote brand awareness, the company wraps distinctive blue-and-white elastic bands around each oyster and offers a guarantee -- and liability insurance -- promising that its oysters are safe.

Yet even the best process is useless if there aren't any oysters coming in to the dock. Tesvich cried as he told his workers that the company was closing indefinitely: "We have a hardworking, dedicated group here...and I want to see you back." But with oil poisoning the oyster beds and BP dominating the job market, the future looks murky for AmeriPure.