Business
McDonald’s $5 meal deal blamed for demise of french fry factory
The biggest french fry supplier to McDonald’s has blamed the chain’s $5 meal deal for its factory closure and job losses.
Lamb Weston, the largest producer of fries in North America, announced earlier this month that it is closing a factory in Washington and laying off nearly 400 employees.
Boss Thomas Werner said that demand for fries is falling because of smaller portion sizes included in discount deals. Burger King and Wendy’s have near-identical $5 meals too.
‘Many of these promotional meal deals have consumers trading down from a medium fry to a small fry,’ he said on an earnings call earlier this month.
McDonald’s initially launched its $5 value meal as a summer promotion in June, but has extended it to Christmas due to high demand from cash-strapped customers.
‘The extension of the $5 Meal Deal, and the other offerings we’re announcing for our fall line-up, are just a few of the ways we’re 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 deal after he ‘zig-zagged the country’ and participated in focus groups with its customers.
‘They’ve felt the stress of the inflation over the last few years, and so this is a great opportunity for McDonald’s to bring them value,’ 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 fries portions are certainly part of the problem,’ Neil Saunders, Managing Director of GlobalData Retail, told DailyMail.com.
‘Individually this doesn’t make much difference, but across the hundreds of millions of transactions within fast food this has a massive impact on volumes.
‘The other problem alongside this is people dining out less which is also impacting the volume of fries sold.’
McDonald’s is Lamb Weston’s largest customer, accounting for 13 percent of its sales, according to CNN.
As well as fully shutting down the Washington factory, Lamb Weston also announced it was temporarily cutting production at its other plants due to the slowing of customer demand.
Following several years of price rises, many fast food giants, including McDonald’s, have begun to offer value deals in a bid to win back customers.
McDonald’s suffered a surprise fall in sales in the April to June quarter, dragged down by fewer customers visiting the chain.
Around 80 percent of french fries consumed in the US come from fast-food chains, according to Lamb Weston
Following several years of price rises, many fast food giants, including McDonald’s, have begun to offer value deals in a bid to win back cash-strapped customers
It was the first sales decline since 2020, when the Covid-19 pandemic shuttered stores and millions stayed home.
According to Lamb Weston, around 80 percent of french fries consumed in the US come from fast-food chains – which means it is also exposed to declining foot fall at other restaurants.
Customer traffic to fast-food chains dropped 2 percent last quarter and 3 percent the previous quarter compared to the same time last year, the producer said.
It comes amid reports activist investor Jana Partners is pushing Lamb Weston to explore a sale.
Lamb Weston shares jumped around 8 percent in early trading on the news from The Wall Street Journal.