The rising popularity of weight-management drugs like Ozempic and WeGovy is not only killing appetites, but also growth forecasts for the packaged-food industry.
The GLP-1 drugs, which mimic a hormone that signals to one’s brain that they’re full, are making users of the diabetes medications eat less and eat healthier. In theory, that’s bad news for junk food brands that make high-fat and high-sugar processed foods.
Sure enough, Walmart is already noticing a “a slight pullback in overall basket” among people taking the weight management meds versus the total population, Walmart US CEO John Furner said in an interview with Bloomberg on Wednesday (Oct. 4). “Just less units, slightly less calories,” he said.
The same day, British bank Barclays warned that the popularity of such drugs could dampen demand for companies like PepsiCo, which makes sugary drinks and snacks like Cheetos and Doritos. A company like Mondelez, which includes Cadbury and Toblerone chocolate as well as cookie brands Oreo and Chips Ahoy! in its portfolio, faces the threat, too.
Fast-food chains like Domino’s Pizza, McDonald’s, KFC, and Krispy Kreme should also rethink their menu offerings, the early data suggest. More than 70% of people on the new drugs said they visited fast-food restaurants less frequently, according to a recent Morgan Stanley report.
But there’s little evidence to suggest that supermarket shelves globally should be remade overnight, if ever. These drugs are, for now, catering mainly to the very affluent given the massive barriers to use, including a hefty price tag, limited supply, and a lack of insurance coverage.
Moreover, anyone who has lived through the natural foods craze of the 1970s, the low-fat obsession of dieters in the 1980s and ‘90s, or the low-carb Atkins diet fad of the early 2000s can tell you: It takes a lot to curb the appetite of the world’s consumers. Tastes and habits change, and the popularity of different snack categories may rise and fall, but alongside these trends, the packaged food industry only got bigger and stronger.
Quotable: Seeing sales opportunity in low-income households
“Consumption of indulgent salty snacks that would be considered ‘junk food’ generally over-indexes toward lower-income individuals, who are unlikely to be these drugs’ primary users.”
—RBC analyst Nik Modi
Weight-management drug use, by the digits
9 million: Prescriptions for weight-loss drugs written in the US in the fourth quarter of 2022, according to a Trilliant Health report
24 million: People in the US—7% of the overall population—that could be taking the hunger-suppressing drugs by 2035, according to Morgan Stanley’s estimates
20-30%: Drop in daily calorie intake among the 300 patients taking GLP-1 drugs, according to Morgan Stanley
$100 billion: How much the GLP-1 drug market could be worth by 2030, with Eli Lilly and Novo Nordisk leading, as per JPMorgan
$80 million: How much United Airlines would save on fuel costs if every passenger dropped 10 pounds on average, according to a Jefferies analyst Sheila Kahyaoglu. “Weight is a crucial element for fuel efficiency… Airlines’ biggest expense is fuel, which has been exacerbated as jet fuel prices have rebounded,” Kahyaoglu wrote, according to Insider.
A non-exhaustive list of potential losers in a world with widespread use of weight-loss meds
Besides the obvious winners—drugmakers Novo Nordisk, which briefly overtook LVMH as Europe’s biggest company with a valuation bigger than Denmark’s economy, and Mounjaro manufacturer Eli Lilly—distributors of the meds, like pharmacy chain CVS, as well as fitness-related brands, such as athletic apparel and footwear maker Nike and gym chain Planet Fitness, stand to benefit if more Americans look to get fit.
The unhealthy food market arguably has the most to lose. But a slew of other industries stand to lose ground if more consumers lean on weight-loss drugs:
💉 Medical device manufacturers. Predictions suggesting the drugs could reduce the need for insulin injections have already hurt stocks of insulin delivery system manufacturers like Insulet and Tandem Diabetes Care. GLP-1 drugs also could alleviate chronic conditions obese patients often suffer from, such as sleep apnea, leading to lower demand for CPAP machines.
🛋️ Furniture and more. Because the weight-loss drugs are expensive and rarely covered by insurance, the out-of-pocket cost is high for customers. As a result, households could pull back on spending on discretionary goods like furniture, Jefferies suggests.
🚬 Beer and tobacco producers. Patients taking weight-management drugs report suppressed desire to drink alcohol and smoke cigarettes. A recent study with mice as subjects found that GLP-1 drugs reduce nicotine intake and reward. If enough people get on WeGovy, Ozempic, and other such drugs, it could cripple sales for big alcohol brands like Anheuser-Busch and Miller, as well as major tobacco manufacturers like Altria and Phillip Morris.
But we’d note that the very existence of Altria and Phillip Morris, especially after the tobacco trials of the 1990s, suggests that the vice industry, which has been perfecting its survival skills for centuries, will not see revenues evaporate so easily.