Is it a happy meal? Consistent demand for French fries is excellent news for the US economy.
Customers are still willing to pay more for a side of fries with their meals. This can have a favorable impact on the economy.
Lamb Weston Holdings is a frozen potato provider.
The proportion of consumers ordering the classic side of fast food meals — known as the fry attachment rate — has remained above pre-pandemic levels, according to CEO Tom Werner on the company’s earnings call Thursday. This might reflect a resilient consumer, even as inflation has squeezed wallets and recession concerns have grown.
“The global frozen potato category continues to be solid with overall demand and supply balanced,” he stated. “Fry attachment rate, which is the rate at which consumers order fries when visiting a restaurant or other food service outlets across our key markets, [has] remained largely steady and above pre-pandemic levels.”
When customers are under financial stress, it is normal for them to cut back on spending by switching to cheaper brands or eliminating unnecessary costs. In the case of Lamb Weston and fast-food restaurants, this might show as consumers declining fries or other side items in an attempt to keep spending under control.
Of course, inflation can have an influence on the firm in ways other than fry sales. In important U.S. areas, Lamb Weston witnessed minimal change in total traffic, but there were indications of a shift in customer behavior: Growth in quick-service food providers, which are often less expensive, more than offset reductions in full-service and casual-dining restaurants.
Werner also stated that inflation, notably connected to potato contract pricing, might continue to drive up costs for the firm.
He attributed the decline in restaurant traffic in the fiscal fourth quarter to June. Werner, on the other hand, said it has been heartening to see trends improve since then while staying confident in the company’s potato offers’ capacity to withstand an economic slump.
According to a new report, the Latino economic production in the United States has increased to $3.2 trillion.
“We suspect that restaurant traffic trends will be volatile in the near term as high-interest rates, high inflation, and uncertainty continue to affect consumers,” according to Werner. “That said, frozen potato demand has proven resilient during the most challenging economic times, and we continue to be confident in the long-term growth prospect for the global category.”
The stock of Lamb Weston increased by more than 9% on Thursday. In 2023, the stock has fared nearly in pace with the overall market, rising nearly 11% since the start of the year.