French Fry Giant Lamb Weston Struggles as Fast Food Demand Falters

Lamb Weston, the leading producer of frozen french fries in North America, is facing a significant downturn, with its stock plunging 35% this year, CNN reports.

The company announced last week that it will close a plant in Washington state, lay off nearly 400 employees, and temporarily halt production lines due to declining customer demand.

The potato giant is grappling with an oversupply of fries at a time when consumers are increasingly reluctant to spend on fast food. Restaurant prices have risen faster than grocery store prices in recent years, leading customers to shift towards cheaper alternatives, particularly at home.

This trend has hit Lamb Weston hard, as some 80% of french fries consumed in the US come from fast-food chains. The company’s largest customer, McDonald’s, accounts for 13% of its sales, and its fortunes are directly tied to the fast-food giant’s performance.

McDonald’s, facing declining customer traffic, is attempting to lure customers back with value menus. Its “McDouble or McChicken combo for $5” deal includes a smaller portion of french fries, a trend impacting Lamb Weston’s sales.

The problem extends beyond McDonald’s. Customer traffic to fast-food chains has dropped by 2% in the last quarter and 3% in the quarter before that, according to Lamb Weston. Analysts like R.J. Hottovy of Placer.ai highlight the company’s significant exposure to the fast-food industry, making it highly vulnerable to these trends.