The supplier that produces French fries for McDonald’s is facing challenges amid falling sales.
Lamb Weston, which is the fast-food chain’s largest supplier of fries, has been impacted by reduced consumer demand as well as restaurant traffic.
The company’s president and CEO Tom Werner said in a news release earlier this month that while there was an improvement in financial results in the first quarter of fiscal year 2025 compared to the previous quarter, the overall environment remained challenging.
“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.
In its news release, the Idaho-based company also announced a restructuring plan to improve its profitability by closing one of its older production plants in Connell, Washington, and cutting 4 percent of its workforce, among other initiatives.
“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,” Werner said in the release.
In an emailed response to Newsweek, Lamb Weston said: “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.”
In its statement to Newsweek, the company also pointed out that in its most recently reported quarter, net sales were down just 1 percent from the comparative quarter last year.
The declining sales are partly because of declining restaurant traffic in the United States. McDonald’s, which accounts for 13 percent of Lamb Weston’s sales, reported decreased worldwide sales in July.
While McDonald’s has tried to increase its customer traffic, the measures have not helped the French fry supplier. McDonald’s introduced a $5 meal deal in May that includes a small portion of fries in an attempt to draw more customers in.
Werner said in a company earnings call on October 2 that while these deals increase customer traffic to restaurants, they do not help with the overall sales volume of fries.
“We’re obviously pleased with the growth in restaurant traffic, but it’s important to note that many of these promotional meal deals have customers trading down from a medium fry to a small fry,” he said in the earnings call. “So, while we benefit from improving traffic trends, consumers trading down in serving size acts as partial headwinds for our volume.”
However, a Lamb Weston told Newsweek that it would be inaccurate to blame the meal deals for the supply slowdown.
“Lamb Weston has cited slower demand overall, with reduced restaurant traffic as the leading factor, as the reason for the current oversupply,” the company said.
Newsweek has reached out to McDonald’s for comment via email.
The decreased demand for fast food comes amid price increases in recent years.
The average price of McDonald’s menu items has increased by around 40 percent since 2019, the president of McDonald’s USA Joe Erlinger said earlier this year, due to similar increases in input costs.
In an earnings call in July, Erlinger spoke about the customer pull-back and said, “At the end of the day, we expect customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters in this very competitive landscape.”
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