The rising popularity of appetite-suppressing weight-loss injections is threatening the business prospects of some of the biggest snack food makers, which have seen their stock take a hit this week.
Shares of Jell-O maker Kraft Heinz, Pringles maker Kellanova and soda giant PepsiCo, which owns Frito-Lay, all hit new 52-week lows on Friday, as investors questioned whether weight-loss injections would curb America’s snacking appetite will decrease.
Mondelez International, maker of Oreos, Ritz Crackers, Chips Ahoy and other popular snacks, fell 8.28 percent this week, closing Friday at its lowest level since last November.
Drugs like Wegovy and Ozempic belong to a class of drugs known as GLP-1 agonists that were originally developed to treat type 2 diabetes, but also mimic a gut hormone that suppresses appetite and promotes a feeling of fullness.
Sales of these drugs are soaring, leading to questions about whether greater consumer focus on weight loss could dampen sales for snack makers.
Mondelez International, maker of Oreos, Ritz Crackers, Chips Ahoy and other popular snacks, fell 8.28 percent this week to its lowest since last November
Drugs like Wegovy and Ozempic belong to a class of drugs known as GLP-1 agonists, which mimic a gut hormone that suppresses appetite and promotes a feeling of fullness.
Some companies are already preparing for a possible future in which widespread use of the drugs dramatically changes consumer habits.
Slim Jim beef maker Conagra Brands said Thursday it may consider changing portion sizes of its snacks if the growing use of weight-loss drugs shifts consumption patterns.
“If we end up seeing changes in consumer eating patterns, let’s say they go to smaller portions … (then) we design smaller portions,” CEO Sean Connolly said on a quarterly conference call.
Conagra, which also makes Wet II popcorn, may consider changing the ingredients in some products if consumer preferences change, Connolly said, but added that he doesn’t see such adjustments being necessary in the next six months.
Connolly told Reuters that Conagra’s scientists are studying consumer behavior for possible shifts.
“Clearly one of the things (scientists) can see in the market now is the early days of these drugs being used to help people manage their weight,” he said. “One of the things companies will have to do is understand what the implications will be … if that behavior becomes more broad-based.”
Adoption of weight-loss drugs could force food companies to rethink their revenue and profit forecasts, and change recipes, said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
“It’s certainly a concern that the weight loss drugs will potentially have a significant impact on many consumer packaged goods,” Schulman said.
Adoption of weight-loss drugs could force food companies to rethink their revenue and profit forecasts, and change recipes, experts say
Some companies are already preparing for a possible future in which widespread use of the drugs dramatically changes consumer habits
CFRA Research analyst Arun Sundaram said some packaged food companies are concerned about the long-term impact of the drugs as they sell products that are high in sugar and not necessarily healthy.
Meanwhile, Walmart revealed shoppers are buying less food thanks to the growing popularity of weight loss injections.
Walmart’s U.S. CEO John Furner told Bloomberg News that the company is seeing signs that people taking the stings are buying “fewer units, slightly fewer calories.”
But as the impact of the drugs ripples through society, there are also financial winners, including Denmark-based Novo Nordisk, the maker of Ozempic and Wegovy.
The drug maker overtook LVMH as Europe’s most valuable listed company last month, worth about 385 billion euros ($403 billion) – slightly more than Denmark’s gross domestic product.
In August, the Danish government cited Novo when it lifted its economic growth forecast for this year.
Airlines could also be surprise winners, after a new analysis suggested that United Airlines could save $80 million a year in fuel costs if each passenger shed 10 pounds.
A lighter plane full of slimmer people would significantly reduce the cost of flying, Sheila Kahyaoglu, a Jefferies Financial analyst, found.
Kahyaoglu looked at United but said the benefits would apply to all airlines.
She concluded, in a report released last week and obtained by Bloomberg, that the drugs could be a game-changer for airlines, where fuel and labor are the biggest costs.