McDonald's customers cut back on fries and its biggest supplier is cutting jobs

Americans seem to be losing interest in fast-food chains which, in turn, is costing other individuals their jobs as the biggest fry supplier on the continent continues to endure financial hits.

Fries just don't seem that popular anymore, according to the largest producer of potato wedges in North America Lamb Weston, which is a major supplier to fast-food chains, restaurants, grocery stores. The plummeting demand of french fries has led to the closing of one of the company's production plants in Washington state .

The major closing comes with nearly 400 lay offs equivalent to 4% of it's entire workforce. The company also temporarily cut production lines to meet the slower demand.

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Company stocks also suffered, dropping about 35% this year. The timing couldn't be any worse as Lamb Weston is overstocked with fries at a time when customer demand is in the hole. This is driven by rising restaurant prices, which have increased at a faster rate than grocery store prices in recent years.

Consumers are spending more time food shopping than eating out. Unfortunately, an individual is less likely to cook fries at home, so Lamb Weston's customer base has shrinked significantly. The food supplier said about 80% of french fries eaten in the US originate from fast-food places.

Chains like McDonald's have tried to mitigate this with alluring value meals, like it's recently launched $5 combo that includes a McDouble cheeseburger or a McChicken sandwich, small french fries, 4-piece chicken McNuggets and small soft drink. The efforts aren't doing much for Lamb Weston because customers are buying only the smallest portions of wedges.

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"Many of these promotional meal deals have consumers trading down from a medium fry to a small fry," Thomas Werner, Lamb Weston CEO, said on an earnings call. The company hasn't issued a statement regarding the financial losses. The slowed business at McDonald's spells trouble because the chain is its largest customer, making up 13% of Lamb Weston's total sales.

The pain is being felt across the fast-food spectrum, sales at US food establishments that have been open at least a year dropped 0.7% last quarter compared to the same period a year prior. Analyst R.J Hottovy of analytics firm Placer.ai suggested that Lamb Weston is highly exposed to similar food companies, according to a research note he shared with clients.

Customer visits have been low for a couple years; it was down 2% last quarter and 3% the prior quarter compared to the same time in 2023, Lamb Weston said.