Western Reader
A prominent french fry supplier for McDonald’s, Lamb Weston, is experiencing challenges due to dwindling demand for fast food nationwide, leading to significant layoffs and closures of its facilities. The company recently announced the shutdown of one of its plants in Connell, Washington, resulting in the elimination of about 375 positions, which accounts for 4% of its global workforce. This decision follows a disappointing financial report that highlighted a decrease in the demand for frozen potato products, especially french fries.
The main reason behind this decline is the drop in customer visits at fast-food restaurants like McDonald’s, a major customer that contributes 13% of Lamb Weston’s sales. This change in consumer behavior is largely attributed to rising prices at eateries compared to grocery stores, causing many Americans to reduce their dining out frequency. McDonald’s itself reported a 0.7% decline in sales in the U.S. last quarter, further impacting Lamb Weston’s operations.
McDonald’s french fries supplier suddenly shuts down factory, cuts jobs https://t.co/LXIg0LWzRF pic.twitter.com/5OiBW5boOr
— New York Post (@nypost) October 8, 2024
To address these market shifts, McDonald’s and other fast-food chains have introduced value meals to attract customers back. For example, McDonald’s launched a $5 meal deal featuring a choice of a McDouble or McChicken, small fries, nuggets, and a beverage. However, despite these promotional efforts, suppliers like Lamb Weston have not seen a significant recovery. Customers opting for small fries instead of medium ones have further impacted suppliers reliant on higher sales volumes.
Lamb Weston’s CEO, Thomas Werner, acknowledged these challenges in a recent earnings call, noting that the demand for frozen potato products continues to lag compared to the company’s supply. He highlighted that these market conditions are unlikely to improve shortly, suggesting that reduced demand may persist throughout the fiscal year.
McDonald’s fries contain 19 ingredients.
Previously, they only consisted of potatoes, beef tallow, and salt. pic.twitter.com/azXFSqfJUX
— Paul Saladino, MD (@paulsaladinomd) June 9, 2023
The decision to downsize and adjust production at Lamb Weston comes amidst a broader trend of declining foot traffic at fast-food establishments nationwide. Recent data from industry analysts shows a 2% decrease in fast-food customer visits in the last quarter alone, contributing to the overall decrease in demand for frozen potato products.
While McDonald’s and Lamb Weston explore strategies to navigate these challenges, the situation highlights a significant change in consumer spending patterns. With persistent inflationary pressures, the affordability of dining out has become a growing concern for many Americans. Consequently, McDonald’s value menus and promotional offers may struggle to attract the same level of customer traffic seen in prior years.
In addition to workforce reductions, Lamb Weston is evaluating its production approaches. The closure of the plant in Washington state is aimed at aligning its output with current demand, though the effectiveness of these measures remains uncertain considering the challenging market conditions.
Amidst the enduring frugality among consumers at McDonald’s and other fast-food chains, Lamb Weston’s future profitability hinges on broader economic trends like inflation and the overall cost of living. Until these factors stabilize, the company is likely to face ongoing obstacles in maintaining its position as the primary supplier of french fries in North America.
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