Lamb Weston Announces Job Cuts Amidst Declining French Fry Demand

Lamb Weston, the leading producer of french fries in North America, has announced the closure of its plant in Connell, Washington, resulting in 375 job cuts or 4% of its workforce. According to the company’s earnings report released last week, this decision comes as consumers continue to tighten their belts in response to inflated food prices at fast-food chains.

Anthony Chan, former chief economist at JPMorgan Chase, commented on the situation, noting that current economic conditions are influencing consumers’ spending patterns. On an earnings call, Tom Werner, president and CEO of Lamb Weston, stated, “Restaurant traffic and frozen potato demand, relative to supply, continue to be soft, and we believe it will remain soft through the remainder of fiscal 2025.” He added that the company aims to manage factory utilization rates more effectively and address the ongoing supply-demand imbalance in North America.

The company is undertaking several strategic measures, including reducing headcount, cutting unfilled positions, and lowering capital expenditures. These efforts are expected to generate significant savings and are accounted for in Lamb Weston’s fiscal 2025 targets. Despite the plant closure, the Eagle, Idaho-based company assured Fox Business that its restructuring will not impact supply to customers.

The fast-food sector has been grappling with the impacts of inflation, leading to cautious spending by consumers. A survey conducted in May indicated that 80% of Americans now regard fast food as a luxury due to rising prices. To attract budget-conscious customers, many chains are introducing meal deals. McDonald's, for instance, launched a promotional meal deal comprising a McDouble or McChicken sandwich, four-piece chicken nuggets, small fries, and a small fountain drink. Similar offers have been introduced by competitors like Burger King and Wendy's. However, Werner highlighted a shift in demand, saying, “It’s important to note that many of these promotional meal deals have consumers trading down from a medium fry to a small fry.”

Overall, restaurant traffic in the United States dropped by 2% last quarter and 3% in the previous quarter compared to the same period last year, as reported by Lamb Weston.