McDonald’s largest fries supplier has blamed the chain’s $5 meal deal for the factory closure and job losses.
Lamb Weston, the largest French fry maker in North America, announced earlier this month that it would close a plant in Washington and lay off nearly 400 employees.
Boss Thomas Werner said demand for fries is falling due to smaller portion sizes in discount offers. Burger King and Wendy’s also have nearly identical $5 meals.
“Many of these promotional meal deals are moving consumers from mid-range to small fryers,” he said during an earnings call earlier this month.
McDonald’s initially launched its $5 meal as a summer promotion in June, but has extended it until Christmas due to high demand from cash-strapped customers.
McDonald’s largest fries supplier has blamed the chain’s $5 meal deal for the factory closure and job losses
“The extension of the $5 Meal Deal and the other offers we’re announcing for our fall offerings are just some of the ways we’re working hard to provide great meals at a fair price,” said Joe Erlinger, president of McDonald’s USA, said in September.
Erlinger confirmed that McDonald’s brokered the deal after “zigzagging around the country” and participating in focus groups with its customers.
“They have felt the pressure of inflation in recent years, and so this is a great opportunity for McDonald’s to provide value to them,” Erlinger said.
The meal consists of a McDouble or McChicken, a four-piece portion of chicken nuggets, a small drink and – crucially – a small portion of fries.
“Meal deals with smaller chip portions are certainly part of the problem,” Neil Saunders, Managing Director of GlobalData Retail, told DailyMail.com.
‘Individually this does not make much difference, but across the hundreds of millions of transactions within fast food, this has a huge impact on volumes.
‘The other problem is that people are eating out less, which also has consequences for the amount of fries sold.’
McDonald’s is Lamb Weston’s largest customer, accounting for 13 percent of sales CNN.
In addition to the complete closure of the Washington plant, Lamb Weston also announced that it would temporarily scale back production at its other plants due to declining customer demand.
After several years of price increases, many fast food giants, including McDonald’s, have started offering bargain deals in an attempt to win back customers.
McDonald’s experienced a surprising decline in sales in the April to June quarter, caused by fewer customers visiting the chain.
According to Lamb Weston, about 80 percent of the fries consumed in the U.S. come from fast food chains
After several years of price hikes, many fast food giants, including McDonald’s, have started offering bargain deals in an effort to win back cash-strapped customers
“Meal deals with smaller chip portions are certainly part of the problem,” says Neil Saunders, Managing Director of GlobalData Retail
It was the first drop in sales since 2020, when the Covid-19 pandemic closed stores and millions stayed home.
According to Lamb Weston, about 80 percent of fries consumed in the US come from fast-food chains, meaning fries are also being exposed to declining foot traffic in other restaurants.
Customer traffic to fast food chains fell by 2 percent last quarter and 3 percent the quarter before compared to the same period last year, the manufacturer said.
It comes amid reports that activist investor Jana Partners is pushing Lamb Weston to explore a sale.
Shares of Lamb Weston rose about 8 percent in early trading after the news of The Wall Street Journal.