Lamb Weston, a leading french fry producer, has been hit with a potato surplus due to a decline in restaurant demand. The company reported a $71 million charge to write off the excess supply, attributing it to consumers' inflation concerns and reduced dining out habits. Lamb Weston had contracted farmers to plant potatoes in January 2023, anticipating strong demand. However, as restaurant traffic plummeted mid-year, the company was left with a surplus of contracted potatoes.
"We're obligated to purchase all the potatoes grown on these contracted acres per our agreements with our growers," said Werner. "However, our initial sales forecast has turned out to be more aggressive than our current estimate." In addition to the drop in restaurant traffic, higher-than-expected crop yields also led to the surplus. The company expects sales volumes to recover by fiscal 2025 and is currently in contract negotiations with its farmers.
Despite the current challenges, the National Restaurant Association reported an improvement in same-store sales in November, indicating a potential rebound in the restaurant industry.
Source: fooddive.com
