Posted 29 November 2023
Type-2 diabetes and obesity ‘GLP-1’ drugs Ozempic and Wegovy have been hailed as breakthrough treatments. They work by mimicking the hormone released after eating which increases insulin production, reducing appetite and ultimately making patients feel fuller. The health benefits of combating obesity are numerous but, aside from these, the drugs have caused a shake up in the healthcare sector. The drug makers Novo-Nordisk and Eli Lilly have benefitted significantly, whereas companies selling traditional obesity treatments have seen steep losses.
Outside of healthcare investors are also speculating on how these drugs might change consumer behaviour and the knock on effect this creates. Walmart recently announced that it has seen a “slight pull back in [the] overall basket” of its customers that are taking GLP-1 drugs and this is while only less than 1% of the US population is currently taking GLP-1 drugs. The number of patients will only increase and there are some food categories that are particularly exposed to a change in consumer appetites. For example, around 1 in 10 US adults account for over 30% of confectionery consumption and just 20% account for 70% of its ice cream consumption. Indeed, Krispy Kreme was recently downgraded by analysts due to fears around of the drugs’ effect on demand.
It is too early to tell the impact GLP-1 drugs will have outside of healthcare over the longer term, however, the change in consumer habits is a very interesting consequence and could have big impacts on companies making fatty foods.
Source: Bloomberg, Pendal Group
Thank you to John Messer for the note