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Food retailers and producers are getting slammed as GLP-1 drugs like Ozempic raise growing alarms about demand

Matthew Fox   

Food retailers and producers are getting slammed as GLP-1 drugs like Ozempic raise growing alarms about demand
  • The rise of GLP-1 drugs is driving consumer-staple stocks lower as patients eat less food.
  • PepsiCo, Coca-Cola, Walmart, and Costco have been slammed on the prospect of less food demand.

Consumer-staple stocks have been slammed this week as investors try to size up the negative impact GLP-1 drugs such as Ozempic, Wegovy, and Mounjaro could have on food companies.

Shares of PepsiCo and Coca-Cola fell 6% this week, McDonald's lost 5%, and top food retailers including Walmart and Costco fell as much as 4% on Friday alone, despite the session's broader market rally.

The wave of selling was initially sparked by comments from Walmart US CEO John Furner, who told Bloomberg on Wednesday that he was already seeing an impact from the GLP-1 agonists.

"We definitely do see a slight change compared to the total population. We do see a slight pullback in overall basket, just less units, slightly less calories," he said.

Walmart is the top food and grocery retailer in the US. And through its pharmacy unit, the company can use anonymized data to analyze the spending habits of its customers that are taking GLP-1 drugs.

The drugs, approved for conditions including diabetes and obesity, help patients feel fuller faster.

"When you go on GLP-1, you eat significantly less and you feel fuller. So you lose the weight," Jeff Johnson, a Baird analyst, told Insider last month.

And a recent Morgan Stanley survey of 300 patients taking the GLP-1 drugs echoed the idea that when you're on them, you eat less and therefore buy less food. In the survey, 77% of respondents said they visited fast-food restaurants less frequently and that their calorie intake fell 20% to 30% on a daily basis.

In a Friday note, Bank of America estimated that GLP-1 drugs could quell addictive behaviors among consumers, which could lead to an overall decline in consumption of snacks and beverages. That's bad news for soda companies such as Coca-Cola, and it could be a double whammy for PepsiCo, which sells both sodas and snacks.

"Based on our US calorie consumption model, calorie and consumption reductions could be in the 1% to 3% range," Bank of America said, adding: "We see highest risk to alcohol, snacking relative to meals, and non-alcoholic beverages."

And while retailers including Walmart and Costco, which both operate a network of in-house pharmacies, could see a sales boost from filling GLP-1 prescriptions, the profits would be less noticeable because of the lower margins for branded drugs.

About 9 million Americans were taking a GLP-1 drug as of the end of 2022, a Trilliant Health analysis found. That number could increase significantly over time as supply shortages of the drug are resolved, as indications for the drugs expand, and especially if health-insurance companies increase coverage for the drugs.



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