Fast-Food Backlash Hits French Fry Supplier
Americans are increasingly moving away from fast food, and this shift is having a significant impact on suppliers like Lamb Weston, the largest producer of French fries in North America. Last week, Lamb Weston announced it would close a production plant in Washington state, resulting in nearly 400 layoffs, which amounts to about 4% of its workforce.
The decision comes as the company grapples with declining demand for its products.
Shares of Lamb Weston have plummeted 35% this year, reflecting the challenges the company is facing in a market that is oversupplied. Consumers have been pulling back on fast-food purchases, particularly as restaurant prices have risen faster than grocery prices.
This trend has led many to choose smaller portions or more budget-friendly options when they do visit fast-food chains.
To combat declining sales, chains like McDonald’s have introduced value menus and promotional meal deals, such as a $5 combo that includes a burger, small fries, chicken nuggets, and a drink. However, these deals have resulted in customers opting for smaller fries, which does little to benefit Lamb Weston.
According to CEO Thomas Werner, many customers are trading down from medium fries to small ones.
McDonald’s is a critical customer for Lamb Weston, accounting for 13% of its sales. As the chain struggles—with a 0.7% drop in U.S. sales last quarter—Lamb Weston feels the effects. Overall customer traffic to fast-food restaurants has decreased by 2% last quarter and 3% in the previous quarter, further indicating a challenging environment for both the fast-food industry and its suppliers. As consumer habits change, Lamb Weston’s reliance on fast-food chains puts it in a precarious position.
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