A major McDonald’s french fries supplier is slashing jobs as cash-strapped customers steer clear of the fast food industry amid inflated prices.
Lamb Weston, the largest producer of french fries in North America, announced last week that it is cutting 4% of its global workforce and curtailing production lines following a dismal earnings report, as first reported by CNN.
The Eagle, Idaho-based company closed a plant in Connell, Wash., on short notice — resulting in the loss of 375 jobs, according to NBC NonStop Local.
“Restaurant traffic and frozen potato demand, relative to supply, continue to be soft, and we believe it will remain soft through the remainder of fiscal 2025,” Lamb Weston CEO Tom Werner said in a statement.
“Together, we expect these actions will help us better manage our factory utilization rates and ease some of the current supply-demand imbalance in North America.”
Lamb Weston shares have plunged nearly 35% so far this year.
Inflation-battered consumers have pulled back sharply on spending at fast food restaurants, instead opting to cook at home.
Though Lamb Weston also supplies restaurants and grocery stores, it relies heavily on its fast food business.
Around 80% of french fries consumed in the United States come from fast food joints, according to Lamb Weston.
In an effort to win back customers, fast food chains have launched a slew of affordable meal deals.
McDonald’s launched a $5 Meal Deal this summer that includes a McDouble or McChicken, a four-piece nugget, a small fries and a small fountain drink.
Rivals like Burger King and Wendy’s offer competing deals, and most of them with small fries, as well.
But that value meals have resulted in a drop in overall demand for fries.
“Many of these promotional meal deals have consumers trading down from a medium fry to a small fry,” Werner said last week on an earnings call.
Lamb Weston did not immediately respond to requests for comment.
McDonald’s is Lamb Weston’s largest customer. Trouble for the golden arches spells trouble for Lamb Weston, and McDonald’s has seen its sales continue to fall.
McDonald’s same-store US sales dropped 0.7% last quarter compared to the same period a year earlier.
Lamb Weston’s fiscal year 2025 first quarter results weren’t much better.
The french fries supplier’s net sales declined 1%, its income from operations dropped 34% and its net income plummeted 46% all compared to the same period a year earlier.
Credit: Source link
