Wall Street is presently buzzing with questions about how the ascent of weight loss drugs could throw a monkey wrench at the operations of our most loved consumer giants.
As these pharmaceutical weight loss rebels gain momentum, some analysts are making claims that these drugs can revamp consumer habits and behaviors, and influence purchasing decisions. As a consequence, this could unfavorably affect the sales and revenues of major corporations.
However, it turns out that it may be too early to tell if there could be any potential impact on companies like PepsiCo, Darden Restaurants, Hershey, and Nestle. Some of these giants are persuading investors that they will adapt to such concerns if needed in the long term.
Charting the wider effects and impacts of the widespread adoption of weight-loss drugs results in something unpredictable like the weather. One moment it’s blue skies and the next it’s a downpour. But we’re still keeping an eye out on the horizon, although it’s challenging to say where the wind may take its course.
The rise of weight loss drugs
The global obesity epidemic has been flooding headlines lately, and the public has become more anxious about what this could mean for the greater population. This type of scenario is a hotbed for research and development folk in the pharmaceutical industry.
This is when weight loss drugs known as GLP-1s had their red carpet moment. The trendy players in the game, promising to stay committed to shaping our waistlines, and likely market dynamics as well have become a keen interest for investors.
The impact that these supplements will have in the long run on food producers, restaurants, and other industries is yet unknown, as is the number of people who will actually take them and for how long.
However, initially, these drugs were recommended for balancing blood glucose levels in individuals with Type 2 diabetes, but now this class of medication is being swallowed up by people who are dealing with obesity, in order to aid weight loss. If you haven’t already guessed, this has now spiked the levels of demand for these drugs, owing to their dual effects, and mostly because Novo Nordisk, a Danish multinational pharmaceutical company’s production of Wegovy, another weight loss drug, is no longer able to keep up with skyrocketing demand.
Shifting tides: How what we love to buy is transforming
Now, the big fuss behind these miraculous pills, or whatever they hope to be, is how they could alter our purchasing, eating, and lifestyle habits.
Various factors surrounding the multiplex interaction of consumer behavior, are inclusive of economic, cultural, and personal considerations.
Imagine this: you can get your hands on these weight loss pills and they’re available in almost every drug store or supermarket. These pharmaceutical advancements are designed to assist individuals in losing weight. Given that, people may naturally rethink their daily routines and habits, and in turn, change what they grab off the grocery store shelves. This will eventually impact the demand for certain food brands and the overall performance of the health industry.
Consumer giants on the radar
Walmart claims to be observing changes in the demand for food items from customers that are on Wegovy, Ozempic, and other appetite suppressants, as a result, the basket-shares of food and beverage companies were affected.
Additionally, a recent survey by Morgan Stanley, a global leader in financial services—revealed that patients using weight-loss medications tended to drink less alcohol and carbonated drinks and cut back on meals and snacks.
The Bank of America stated that companies in the food and beverage industry that sell alcohol, snacks, and non-alcoholic carbonated drinks are most vulnerable to the widespread use of GLP-1 medications; a group that includes Ozempic.
Prescription appetite suppressants such as Ozempic and Wegovy are being taken by an increasing number of Americans, along with certain other forms of consumption. However, appetite suppressants may also increase consumer demand for more healthful foods and exercise regimens.
Now that a sufficient number of people are consuming these drugs, big food stores claim to have already witnessed a decline in food demand/consumption. According to John Furner, CEO of Walmart U.S., “We definitely do see a slight change compared to the total population, we do see a slight pullback in the overall basket,” he told Bloomberg earlier this month. “Just less units, slightly less calories”.
According to a recent analysis by Morgan Stanley Research experts, 24 million Americans, or 7% of the country’s population, are expected to be users of this weight loss drug by 2035. In light of the expected broader adoption of these medications, firms are assessing their own risk of potential losses due to them.
AB Foods unfazed by the dawn of new weight loss drugs
The parent firm of well-known brands like Twinings and Primark, AB Foods, seems surprisingly unfazed by the discussion surrounding the possible effects of novel weight-loss medications on food demand. The business recently released a statement demonstrating its “not worried” attitude and confidence in the robustness of its varied portfolio.
Grocery brands owned by AB Foods are industry leaders in several countries. These consist of Ovaltine beverages, Jordans cereals, Twinings tea, and Kingsmill bread. Major sugar, ingredient, and agricultural industries are also owned by it.
According to George Weston, CEO of AB Foods, “We’re not worried about volumes at all,” in a Reuters interview. “We are not a business that thrives by selling more food, we try to premiumize, we try to trade people up, we try to offer better food than people might have eaten before,” he stated.
How weight loss meds are changing the curves game in fashion
One industry- the fashion industry is biting its nails along with the others. They’re afraid that curvy models will probably see these pills as an advantage and that could impact size curves for the apparel industry.
New research from Impact Analytics says that the conversations about these medications “has centered on their revolutionary potential for weight loss and improved health, and no one has ventured to consider the profound implications they may have on the optimization of size curves for fashion retailers”.
The report’s authors say that according to their study, merchants run the risk of having their whole profit margin shrink if size curves don’t respond, meaning that more than 10% of their clothes inventory will go unsold by the end of the year. Fashion merchants risk financial ruin if they don’t make the necessary adjustments to account for this significant shift in body sizes in a business where accuracy and flexibility are critical.
The researchers advised brands and retailers to “get ahead of the problem” by learning how effective the current size curves are and “identifying gaps and their causes and correcting them.” To accomplish this, producing fresh size curves for 2024’s spring and summer should be a top priority.
Innovation becomes the name of the game
Maybe soon enough consumer goods industries could start streaming their resources into inventing fresh products that scream “health and wellness” to keep the ball rolling even through the changing times.
Here’s the kicker: In the long run it’s quite difficult to map how safe and successful these drugs will be, as we’re still in the early chapters of a book that is yet to clue out its plot twists.
Unexpected side effects, obstacles related to regulations, or perhaps even another breakthrough that steals the spotlight.
(Tashia Bernardus)