Are Wegovy and Ozempic a Threat to the Food Industry?

As weight loss drugs like Wegovy and Ozempic (Ozempic is approved for type 2 diabetes treatment but is used off-label for weight loss) continue to gain traction across the US, Americans could potentially reduce their purchases of high-calorie snacks and fast-food. While it’s still too early to tell, this shift has the potential to profoundly transform the food industry and it’s catching the attention of investors and industry leaders.

Before diving deeper into the potential effects on the food industry, let’s first understand these drugs. Classified as GLP-1 drugs, Wegovy and Ozempic replicate a hormone that signals fullness to the brain, pushing people, even those on diabetes medications, to consume less and opt for healthier dietary selections.

Originally designed for type 2 diabetes management, many now see Wegovy and Ozempic as a breakthrough for weight loss, frequently consulting their medical practitioners. This massive demand, partly driven by social media and celebrities allegedly taking the drugs, has led to shortages.

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The food industry has slowly but surely become aware of the potential impact of weight loss drugs. Recently, Walmart’s US CEO told Bloomberg that consumers using Ozempic tend to purchase fewer groceries. This insight was derived from Walmart’s analysis of its pharmacy and grocery data. 

PepsiCo also commented on this trend during a recent financial update. While the beverage and snack giant showed strong financial growth in the recent quarter, it questioned the narrative that Wegovy and Ozempic might cause a market dip. However, the typically stable PepsiCo stock has dropped by almost 13 percent in half a year, reflecting larger trends in the food sector.

Shares of Mondelez International, responsible for products like Chips Ahoy! and Oreo, have fallen nearly 11 percent over the past six months. Food giant Nestlé has seen a 15 percent dip in the same period and even announced plans to develop products similar to Wegovy and Ozempic amidst concerns that they could reduce food consumption and impact profitability.  

While it’s still early, major food players and investors are keenly observing this phenomenon. In a comprehensive report this summer, a group of 17 experts from Morgan Stanley discussed the potential impact of obesity medications on food demand and the possible transformation of the food landscape.

The firm anticipated that, over the next decade, about seven percent of the US population, which equates to 24 million individuals, might use drugs like Wegovy and Ozempic. Those on these medications are projected to reduce their caloric intake by roughly 20 percent. By 2035, this could account for 1.3 percent of the total calorie consumption. 

Thus, if this trend continues, a rise in the adoption of these weight-loss medications could decrease the demand for foods high in calories, fats and sugars, affecting both household groceries and fast-food chains.

So, is the success of the snack and fast-food industry intrinsically linked with overweight consumers? With these weight loss drugs influencing stock prices, there’s a risk these companies may be perceived as unhealthy food promoters if consumers start slimming down. If this phenomenon persists, food companies would need to reposition themselves from just being food suppliers to being partners for those on weight loss journeys in a possibly shrinking market.

As Wegovy and Ozempic become more common, factors such as regulatory challenges, adoption procedures and costs will possibly limit their extensive use, but only time will tell their true impact on the food industry. Nevertheless, it’s evident they’re causing unease among food industry stakeholders and investors.