A major supplier of french fries to McDonald’s has cut jobs and abruptly closed a factory, as cash-strapped fast food customers cut back on their meals – or skip the side order altogether – amid price inflation.
To combat sluggish sales, the fast-food giant launched a $5 deal this summer that includes a McDouble or McChicken meal, a four-piece nugget, small French fries and a small fountain drink.
Competitors like Burger King and Wendy’s have offered similar offerings, most of which come with small fries.
But the popularity of value meals has led to a decline in overall demand for French fries, according to the CEO of Lamb Weston, the largest French fries producer in North America.
Consumers hit by inflation have sharply cut back on spending at fast food restaurants, hurting Lamb Weston. Bloomberg via Getty Images
“Many of these promotional meal deals have consumers trading in medium-sized French fries for smaller ones,” said Tom Werner, whose company supplies about 80% of the French fries sold at U.S. fast-food restaurants.
However, inflation-hit consumers have sharply cut back on spending at fast food restaurants, and many have chosen to cook at home.
Those dining out have seen menu prices skyrocket, especially in California after the state implemented a $20-an-hour minimum wage for fast food workers on April 1.
McDonald’s same-store sales in the United States fell 0.7% in the fourth quarter compared to the same period a year earlier.
The burger and fries company is Lamb Weston’s biggest customer. The problem of the golden arches means the Lamb-Weston problem.
Lamb Weston is struggling due to consumer decline in the fast food industry. Lamb Weston/Facebook
Although it also supplies upscale restaurants and grocery stores, Lamb Weston relies heavily on its fast-casual business.
Shares of Lamb Weston are down nearly 35% this year.
Last week, Lamb Weston announced it would cut 4% of its global workforce and shrink production lines after a dismal earnings report, as first reported by CNN.
The Eagle, based in Idaho, closed a factory in Connell, Wash., on short notice — resulting in the loss of 375 jobs, according to NBC NonStop Local.
“Restaurant traffic and frozen demand for potatoes, relative to supply, remains weak, and we believe it will remain weak through the remainder of fiscal 2025,” Werner said during an earnings call.
“Together, we expect these actions to help us better manage our plant utilization rates and mitigate some of the current supply-demand imbalance in North America.”
The French fries supplier’s net sales fell 1%, its income from operations fell 34%, and its net income fell 46%, all compared to the same period a year earlier.
Lamb Weston did not immediately respond to requests for comment.
