A fascinating anecdote about the “fries attachment rate”

This post was originally posted on TKer.com.

Consumer behavior is incredibly complex and nuanced.

Over the past year, we have learned that consumer spending may rise even as consumer confidence plummets amid high inflation and a growing risk of recession.

One category that has seen a particularly high level of inflation is travel, with airfares up 28% from a year ago. Yet one of the largest sectors of consumer spending has been vacation travel, which, by the way, is considered discretionary spending.

As for discretionary spending, analysts at Bank of America recently found “Consumers don’t necessarily dine out less during downturns, but instead tend to gravitate towards cheaper restaurants.”

This brings us to one of my favorite quotes from the recent earnings season.

It comes from Lamb Weston LW 0.11%↑, the $11 billion potato processor that supplies frozen French fries to your favorite restaurants, including McDonald’s. During the company’s quarterly earnings call on July 27, CEO Tom Werner drew attention to the “fries attachment rate” (via The Motley Fool):

Despite pressure on overall restaurant traffic, demand for fries remains strong as the U.S. fries attachment rate, which is a rate at which consumers order fries when visiting a restaurant or other outlets restoration, remains above pre-pandemic levels.

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In other words, when people go out to eat, they don’t allow their deteriorated feelings about the economy to influence their decision to order fries.

Here are some more colors from CFO Bernadette Madarieta:

Overall, we expect US demand to remain strong, but will also likely be affected by the significant inflation that consumers are facing. In the event of an economic downturn, we expect French fries demand to be resilient, albeit with little to no growth. This matches what we experienced during the Great Recession of 2008-2010.

Although the worst economic crisis since the Great Depression may have stunted growth, it wasn’t enough to get people to stop ordering fries.

Fascinating stuff.

In case you missed it

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For all, here is a roundup of some of TKer’s most talked about paid and free newsletters. All titles are hyperlinked to archived pieces.

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The stock market can be a daunting place: it’s real money at stake, there’s an overwhelming amount of information, and people have lost fortunes there very quickly. But it is also a place where thoughtful investors have accumulated a lot of wealth for a long time. The main difference between these two perspectives has to do with the misconceptions about the stock market that can cause people to make poor investment decisions.

This post was originally posted on TKer.com.

Sam Ro is the founder of Tk.co. Follow him on Twitter at @SamRo.

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