A major McDonald’s french fries supplier slashed jobs and abruptly shut closed a factory as cash-strapped fast-food customers downsize their meals — or skip the side order completely — amid inflated prices.
To combat slowing sales, the fast-food giant 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 offered similar deals, most of them coming with small fries.
But the popularity of the value meals has resulted in a drop in overall demand for fries, according to the CEO of Lamb Weston, the largest producer of french fries in North America.
“Many of these promotional meal deals have consumers trading down from a medium fry to a small fry,” said Tom Werner, whose company supplies around 80% of french fries sold at fast food joints in the US.
Inflation-battered consumers, however, have pulled back sharply on spending at fast food restaurants, with many opting to cook at home.
Those that do eat out have seen menu prices soar, especially in California after the state implemented a $20 an hour minimum wage for fast food workers on April 1.
McDonald’s same-store US sales dropped 0.7% last quarter compared to the same period a year earlier.
The burger-and-fries company is Lamb Weston’s largest customer. Trouble for the golden arches spells trouble for Lamb Weston.
Though it also supplies higher-end restaurants and grocery stores, Lamb Weston relies heavily on its fast food business.
Lamb Weston shares have plunged nearly 35% this year.
Last week, Lamb Weston announced that it was 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,” Werner said during an earnings call.
“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.”
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.
Lamb Weston did not immediately respond to requests for comment.