The king of American fries rings the alarm bell

Americans are opposing McDonald's and fast-food chains. This has harmed the interests of French fry suppliers such as Lamb Weston. Lamb Weston is the largest French fry producer in North America and a major supplier to fast food chains, restaurants, and grocery stores. The company is closing a production plant located in Washington State. The company recently announced that it will lay off nearly 400 employees, accounting for 4% of the total workforce, and temporarily reduce production lines to cope with slowing customer demand.

Firstly, Lamb Weston's stock price has fallen by 35% this year. During a period of low demand, this potato giant had an oversupply. In recent years, restaurant prices have risen faster than grocery store prices, leading consumers to be unwilling to visit fast food chains. This shift has had an impact on Lamb Weston as people are unlikely to make French fries at home. According to Lamb Weston, about 80% of the French fries consumed in the United States come from fast food chains. Fast food chains like McDonald's are launching value menus in an attempt to attract customers back. McDonald's has introduced a $5 combo that includes a McDonald's double cheeseburger or a McNuggets sandwich, small fries, four chicken nuggets, and a small soft drink. But these discounts are of no help to Lamb Weston, as people buy smaller portions of French fries.

Secondly, due to inflation, consumers have significantly reduced their spending in fast food restaurants, and many choose to cook at home. Those dining out have seen menu prices skyrocket, especially in California, which implemented a minimum wage of $20 per hour for fast food workers on April 1st. Last quarter, McDonald's US same store sales decreased by 0.7% compared to the same period last year. This burger and french fry company is Lamb Weston's largest customer. The trouble of the Golden Arches means the trouble of Lamb Weston.

On the other hand, McDonald's, the largest customer, accounts for 13% of Lamb Weston's sales. The development of McDonald's is closely related to the development of Lamb Weston, and McDonald's is also facing difficulties. Affected by a decrease in customers, the sales of American restaurants that have been open for at least one year in the last quarter decreased by 0.7% compared to the same period last year. According to a research report provided by analysts at the analysis company to clients, Lamb Weston is also highly dependent on other fast food chains. Compared to the same period last year, the fast food chain's foot traffic decreased by 2% in the previous quarter and by 3% compared to the previous quarter.

In addition, although Lamb Weston also supplies high-end restaurants and grocery stores, it heavily relies on the fast food business. Lamb Weston's stock price has fallen nearly 35% this year. CNN reported for the first time that Lamb Weston announced that due to poor profit reports, the company will lay off 4% of its workforce globally and reduce production lines. The company, headquartered in Eagle, Idaho, closed a factory in Cornell, Washington in a short period of time, resulting in 375 job losses.

Overall, restaurant foot traffic and demand for frozen potatoes remain weak relative to supply, and this situation will continue for the remainder of the 2025 fiscal year. Taking measures to reduce operating costs, including reducing the number of employees and cutting certain vacant positions, as well as reducing capital expenditures, the comprehensive estimated savings resulting from these actions have been reflected in the latest 2025 fiscal year targets. Competitors such as Burger King and Wendy's also offer competitive discounts, and most of them offer small fries. But the value package has led to a decrease in overall demand for French fries. Many promotional packages downgrade consumers from medium fries to small fries.