O growing popularity of weight management medications how Ozempic and WeGovy are not only killing appetites, but also growth forecasts for the packaged food industry.
GLP-1 medicines, which imitate a hormone which signal to the brain that they are full, are causing diabetes medication users to eat less and healthier. In theory, this is bad news for junk food brands that produce processed foods high in fat and sugar.
Certainly, Walmart is already noticing a slight decline in the overall basket among people taking the weight control medicines versus the total population, said Walmart US CEO John Furner in an interview with Bloomberg on Wednesday (October 4). Just fewer units, a little less calories, he said.
On the same day, British bank Barclays warned that the popularity of these drugs can reduce demand for companies like PepsiCo, which makes sugary drinks and snacks like Cheetos and Doritos. A company like Mondelez, which includes Cadbury and Toblerone chocolates, as well as the Oreo and Chips Ahoy! in its portfolio, also faces the threat.
Fast food chains the likes of Dominos Pizza, McDonalds, KFC and Krispy Kreme should also rethink their menu offerings, early data suggests. More than 70% of people taking the new medications said they visited fast-food restaurants less frequently, according to a recent study. Morgan Stanley Report.
But there is little evidence to suggest that supermarket shelves around the world should be re-stocked overnight, if ever. These medicines are, for now, mainly aimed at the wealthiest, given the enormous barriers to their consumption, including a high price, limited supply and a lack of insurance coverage.
Furthermore, anyone who has experienced the natural food craze of the 1970s, the low-fat obsession of people who dieted in the 1980s and 90s, or Low-Carb Atkins Diet Fad of the early 2000s can tell you: it takes a lot to reduce the appetite of global consumers. Tastes and habits changeand the popularity of different snack categories may increase and fallBut along with these trends, the packaged food industry it just got bigger and stronger.
Quotable: Seeing sales opportunities in low-income families
The consumption of indulgent salty snacks, which would be considered junk food, is generally excessive among low-income individuals, who are unlikely to be the main users of these drugs.
RBC Analyst Nik Modi
Use of weight control medications, by digits
9 million: Weight loss drug prescriptions written in the US in the fourth quarter of 2022, according to a report from Trilliant Health
24 million: People in the US7% of the total population who could take hunger-suppressing drugs by 2035, according to Morgan Stanley estimates
20-30%:Drop in daily calorie intake among 300 patients taking GLP-1 medications, according to Morgan Stanley
US$100 billion: What the GLP-1 drug market could be worth by 2030, with Eli Lilly and Novo Nordisk leading the way, according to JPMorgan
US$80 million: How much would United Airlines save on fuel costs if each passenger lost 10 pounds on average, according to Jefferies analyst Sheila Kahyaoglu. Weight is a crucial element of fuel efficiency Airlines’ biggest expense is fuel, which has been exacerbated as jet fuel prices have recovered, Kahyaoglu wrote: according to Insider.
A non-exhaustive list of potential losers in a world with widespread use of weight loss medications
In addition to the obvious winners, pharmaceutical companies New Nordicwhich briefly overtook LVMH as Europe’s largest company with a valuation in excess of Economy of Denmarkand Eli Lilly, maker of Mounjaro, drug distributors such as pharmacy chain CVS, as well as fitness-related brands such as athletic apparel and footwear maker Nike and gym chain Planet Fitness, could benefit if more Americans seek out get in shape.
The unhealthy food market is, without a doubt, the one with the most to lose. But a number of other industries could lose ground if more consumers turn to weight-loss medications:
Medical device manufacturers. Predictions suggesting the drugs may reduce the need for insulin injections have already hurt the stocks of insulin delivery system makers such as Insulet and Tandem Diabetes Care. GLP-1 medications can also alleviate chronic conditions that obese patients often suffer from, like sleep apnealeading to lower demand for CPAP machines.
Furniture and much more. Because weight loss medications are expensive and rarely covered by insurance, the direct cost is high for customers. As a result, families could cut back on spending on discretionary assets like furniture, suggests Jefferies.
Beer and tobacco producers. Report of Patients Taking Weight Control Medications repressed desire drinking alcohol and smoking cigarettes. A recent study with rats as subjects found that GLP-1 medications reduce nicotine intake and reward. If enough people consume WeGovy, Ozempic and other similar drugs, it could harm sales of major alcohol brands like Anheuser-Busch and Miller, as well as major tobacco manufacturers like Altria and Phillip Morris.
But we note that the very existence of Altria and Phillip Morris, especially after the 1990s tobacco testingsuggests that the addiction industry, which has honed its survival skills for centuries, will not see revenue evaporate so easily.
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