A Sloppy Cut at McDonald's Biggest Fries Supplier: Plant Closure in Response to Declining Demand

The decline in demand for large servings of fries in the USA has led to drastic measures at McDonald's key fry supplier, Lamb Weston. The Idaho-based giant in fry production announced it would close a plant in Connell, Washington, and cut 4% of its workforce. This decision was made as part of a restructuring plan announced on October 1, resulting in approximately 375 layoffs. Teresa Paulsen, spokesperson for Lamb Weston, remained optimistic, assuring that the world's love for fries remained undiminished. The closure of one of the older plants affects less than 5% of production capacity and merely helps to balance the current supply and demand imbalance. Fast-food giants like McDonald's are increasingly relying on promotional pricing to counteract customer withdrawal due to rising prices. A $5 menu was introduced, which includes various products. While these promotions by other chains like Popeye's, Pizza Hut, Taco Bell, Wendy's, and Burger King drive customer traffic, they have also led to many consumers downsizing from medium to smaller fry servings. According to Lamb Weston President Thomas Werner, this development nevertheless causes resistance in the sales volume of the popular potato sticks. The current oversupply in a weakening market significantly affects business results. Nevertheless, net sales have decreased by 1%, and net income saw a decline of 46% compared to the previous year's quarter. Werner expressed concern about the persistently weak demand, which he foresees continuing until the end of the fiscal year 2025. In the clouding economic climate, Lamb Weston's stock price has already dropped 35% since the start of the year. McDonald's reported a 0.7% decline in quarterly sales in July and lamented declining visitor numbers in the USA, following a 10.3% sales increase the previous year, bolstered by the exceedingly popular Grimace Birthday Meal. Joe Erlinger, President of McDonald's USA, anticipates that customers will continue to be influenced by the overall economic situation and rising living costs in the coming quarters.