Fast food lovers are making a notable change in their dining habits by skipping french fries or opting for smaller portions. This shift in preference has led to a decrease in demand for fries, prompting Lamb Weston, a major fries supplier for McDonald's, to shut down one of its facilities in Washington and cut down its workforce.
McDonald's Supplier Layoffs and Plant Closure
Lamb Weston, based in Eagle, Idaho, announced that it will close its plant in Connell, Washington. The company relies on McDonald's for about 14% of its sales and has recently reduced its global workforce by about 4%.
The layoffs also include several unfilled job positions. CEO Tom Werner stated in a news release on October 1 that the decline in restaurant traffic and frozen potato demand is expected to continue through the rest of fiscal 2025.
According to recent data, customer traffic at burger-focused fast food restaurants in the US decreased by about 3% during the three-month period ending on August 25. This drop is an improvement from the over 4% decline noted in the previous quarter, as reported by Werner during an earnings call.
Fast food restaurants overall faced a 2% decline in customer visits, but this is slightly better than the 3% drop in the prior three-month period.
The summer months brought some hope as promotional activities increased, helping to attract more customers. Werner mentioned the rise in value meal offerings, such as McDonald's $5 Meal Deal, which includes small fries, a choice of McDouble or McChicken sandwich, a four-piece Chicken McNuggets, and a small soft drink.
However, even with the increased customer traffic, the trend of opting for lower-priced options and smaller serving sizes presents challenges for Lamb Weston.
Lamb Weston, which separated from Conagra in 2016, has been "temporarily curtailing production lines and schedules" at some North American facilities to address high inventory levels.
The company reported a 1% drop in net sales for the quarter ending August 25, totaling $1.65 billion. Despite this decline, Lamb Weston projects sales between $6.6 billion and $6.8 billion for the 2025 fiscal year, a rise from over $6.4 billion in fiscal year 2024.
In a statement to USA TODAY, company spokesperson Teresa Paulsen expressed optimism about the future of fries. "Lamb Weston is confident in the world's ongoing love of fries – the closure of one of our older facilities accounts for less than 5% of our production capacity, so this adjustment simply helps address a current supply-and-demand imbalance."
Smaller Fry Orders Continue Amid Economic Pressures
The trend of smaller fry orders is expected to continue at McDonald's throughout 2024, as the fast-food chain plans to keep its $5 Meal Deal available in most locations until December.
However, Werner reassured that the decline in fries is not expected to last long. He emphasized that fries remain popular with consumers and are important on menus, boosting confidence in the eventual recovery of the global fry market.
Despite the challenges faced by the fast-food industry, analytics firm Placer.ai reports that traffic at McDonald's and Wendy's remains strong. They track visits to these restaurants by analyzing data from millions of devices and using machine learning techniques. For the first nine months of 2024, both chains have experienced traffic levels comparable to those in 2023.
The decline in fry demand has been partially attributed to McDonald's introduction of $5 meal deals earlier this year, which were designed to provide affordable options for customers. This decision comes as many customers tighten their spending due to inflation and economic pressures, resulting in a noticeable decrease in sales for the fast-food giant.
McDonald's reported a 0.7% decline in sales in the US during the April-to-June 2024 period and a 1% drop globally, marking the first decline in worldwide sales since late 2020, when the COVID-19 pandemic affected the economy.
