Fast food sales slowdown forces major McDonald’s french fry supplier to cut jobs

Jack Aylmer

AMERICANS ARE STARTING TO TURN AWAY FROM FAST FOOD, AND THAT’S SENDING SHOCKWAVES ALL THE WAY DOWN TO THE SUPPLIERS.

ONE OF THE BIGGEST, LAMB WESTON, IS FEELING THE PINCH-BIG TIME.

THEY’RE THE LARGEST PRODUCER OF FRENCH FRIES IN NORTH AMERICA, SUPPLYING FAST FOOD CHAINS, RESTAURANTS, AND GROCERY STORES. 

BUT NOW, THEY’RE CLOSING A PRODUCTION PLANT IN WASHINGTON STATE, LAYING OFF NEARLY 400 EMPLOYEES, AND SCALING BACK PRODUCTION.

IN A PRESS RELEASE, LAMB WESTON’S CEO SAYS THEY EXPECT THE SLUMP IN RESTAURANT TRAFFIC AND FROZEN POTATO DEMAND TO CONTINUE THROUGH 20-25 WHICH IS WHY THEY’RE CUTTING JOBS AND ADJUSTING PRODUCTION. 

WITH INFLATION PUSHING UP PRICES, CUSTOMERS ARE SPENDING LESS AT CHAINS LIKE MCDONALD’S.

ABOUT 80-PERCENT OF ALL FRIES CONSUMED IN THE U.S. ARE FROM FAST-FOOD CHAINS. 

MCDONALD’S HAS BEEN TRYING TO WIN BACK CUSTOMERS WITH VALUE DEALS, LIKE THEIR FIVE-DOLLAR-MEAL THAT COMES WITH A SMALL FRY, A BURGER, NUGGETS AND A DRINK.

BUT IT’S NOT HELPING.

MCDONALD’S, IT’S LARGEST CUSTOMER, SAW ITS U.S. SALES DROP BY POINT-SEVEN-PERCENT LAST QUARTER COMPARED TO A YEAR AGO, AND CUSTOMER TRAFFIC ACROSS FAST-FOOD CHAINS FELL BY TWO-PERCENT IN THE SAME PERIOD.

LAMB WESTON’S STOCK HAS DROPPED NEARLY 35-PERCENT THIS YEAR AND NET INCOME PLUNGED BY 46-PERCENT.

WITH CONSUMERS CUTTING BACK ON EATING OUT AND OPTING TO COOK AT HOME, THE FUTURE LOOKS UNCERTAIN FOR BOTH FAST FOOD AND ITS SUPPLIERS. 

WE’LL BE WATCHING TO SEE IF THIS TREND CONTINUES OR IF THE VALUE MEALS CAN BRING CUSTOMERS BACK.

FOR SAN, I’M JACK AYLMER