McDonald’s largest supplier of French fries has blamed the chain’s $5 meal deal for the closure of its factory and job losses.
Lamb Weston, North America’s largest potato chip producer, announced earlier this month that it will close a factory in Washington and lay off nearly 400 employees.
Boss Thomas Werner said demand for fries is falling due to the smaller portions included in discount offers. Burger King and Wendy’s also have almost identical meals for $5.
“Many of these promotional meal deals cause consumers to switch from medium to small items,” he said on an earnings conference call earlier this month.
McDonald’s initially launched its $5 meal as a summer promotion in June, but extended it until Christmas due to high demand from cash-strapped customers.
McDonald’s largest supplier of French fries has blamed the chain’s $5 meal deal for the closure of its factory and job losses.
“The extension of the $5 meal deal and the other deals we are announcing for our fall programming are just a few of the ways we are working hard to offer great meals at a fair price,” Joe Erlinger, president. of McDonald’s USA, said in September.
Erlinger confirmed that McDonald’s created the agreement after “zigzagging around the country” and participating in focus groups with its customers.
“They’ve felt the stress of inflation in recent years, so this is a great opportunity for McDonald’s to add value to them,” Erlinger said.
The meal consists of a McDouble or McChicken, a serving of four chicken nuggets, a small drink and, above all, a small serving of French fries.
“Meal deals with smaller portions of chips are certainly part of the problem,” Neil Saunders, managing director of GlobalData Retail, told DailyMail.com.
‘Individually this doesn’t make much difference, but in the hundreds of millions of transactions within fast food this has a huge impact on volumes.
“The other problem is that people go out to dinner less, which is also affecting the volume of fries sold.”
McDonald’s is Lamb Weston’s largest customer, accounting for 13 percent of its sales, according to cnn.
In addition to completely closing the Washington factory, Lamb Weston also announced it would temporarily cut production at its other plants. due to slowing customer demand.
After several years of price increases, many fast food giants, including McDonald’s, have started offering cheap deals in a bid to win back customers.
McDonald’s suffered a surprise drop in sales in the April-June quarter, dragged down by fewer customers visiting the chain.
According to Lamb Weston, about 80 percent of French fries consumed in the United States come from fast food chains.
After several years of price increases, many fast food giants, including McDonald’s, have started offering cheap deals in a bid to win back cash-strapped customers.
“Meal deals with smaller portions of fries are certainly part of the problem,” said Neil Saunders, CEO 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, around 80 percent of French fries consumed in the US come from fast food chains, meaning they are also exposed to declining footfall at other restaurants.
Customer traffic to fast-food chains fell 2 percent last quarter and 3 percent the previous quarter compared to the same period last year, the producer said.
It comes amid reports that activist investor Jana Partners is pressuring Lamb Weston to explore a sale.
Lamb Weston shares rose about 8 percent in early trading on the news of The Wall Street Journal.