October 8th 2024.
Lamb Weston, known as one of the largest producers of french fries in North America and a trusted supplier for McDonald's, recently made a difficult decision. In their latest earnings report, the company revealed that they would be closing one of their factories in Cornell, Washington. This sudden closure has also resulted in 375 employees, representing 4% of their workforce, being laid off.
Tom Werner, the president and CEO of Lamb Weston, explained that the decision was due to a decline in restaurant traffic and demand for frozen potatoes. This trend is expected to continue until at least fiscal year 2025. In light of this, McDonald's has introduced a $5 Meal Deal that includes a small order of fries. However, Werner stated that this alone would not be enough to increase demand.
During a call with FOX Business, Werner shared that the factory closure and job cuts were necessary in order to better manage their production and address the current supply-demand imbalance in North America. The company is also taking steps to reduce operating expenses and capital expenditures in order to stay on track with their fiscal targets.
Despite these changes, Lamb Weston has reassured their customers that there will be no impact on their supply. However, the company is expected to save money as a result of these measures. Other businesses, including fast food chains, have also been affected by the current economic climate and the impact it has had on consumer spending.
One such example is McDonald's, who introduced a $5 Meal Deal over the summer in an effort to attract customers. While this deal includes a small order of fries, Werner mentioned that it has not been successful in increasing demand. He also noted that many customers have been opting for the smaller size of fries, rather than the medium, in order to save money.
Interestingly, this announcement from Lamb Weston came just weeks after Pizza Hut's largest franchise put all of its remaining locations up for sale. The franchise, EYM Pizza L.P., was unable to recover from bankruptcy and was forced to close all 127 of its locations across five states. It seems that the impact of inflation and tighter budgets for consumers has been felt across multiple industries, including the fast food and frozen potato supplier market.
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