Weight-Loss Drugs Are Dragging Down Snack Makers’ Bottom Line

Are you sure you’re not feeling even a little peckish?

For people living with diabetes or obesity — two of the biggest health concerns in the US — the immensely popular group of weight loss medications called GLP-1s can be a miracle drug. But for restaurants, snack brands, alcohol makers, and fast food franchises, it’s a rival — and the competition might be winning.

Small Fry

GLP-1s like Novo Nordisk’s Ozempic or Eli Lilly’s Zepbound work by mimicking the natural hormones that make people feel full, reducing cravings and overeating. And when people are less hungry or thirsty, they spend less money on food and drinks. 

CNBC reported that a Morgan Stanley survey found growing evidence that “the drugs have a meaningful impact on consumer behavior and spending on groceries and restaurants.” 

People living healthier is good overall, but it’s not so great for companies that make their nut on burgers, salty snacks, sweet treats, and libations that get you tipsy. It’s turning out that the real disruptor for food-industry investors isn’t plant-based meat alternatives that taste like the real thing (which they never do), but rather a once-weekly injection: 

• In the survey of 300 consumers who started taking GLP-1s in February, 63% said they spend less on eating out at restaurants, while 61% said they’ve cut spending on food deliveries and takeout. And nearly one-third said they’re spending less at the grocery store.
• Morgan Stanley said some of the most at-risk brands include Wendy’s, Hershey, Doritos, Oreos, and Molson Coors — a sort of Hall of Fame of sugary and salty products. 

Reaching Maximum Burrito Capacity: In contrast, Morgan Stanley said nutrition-minded names like Simply Good Foods and Sweetgreen are better positioned to handle the growing popularity of weight loss drugs, which are expected to reach a market value of $105 billion by 2030.

Another brand to possibly bet on is Chipotle, which continues to thrive even after hiking prices six times in the last three years. The Wall Street Journal reported that the healthy-ish burrito chain is a go-to eatery for higher-income millennials who are also health-conscious. Its same-store sales grew 8.4% last quarter, outpacing McDonald’s and Starbucks’ US operations, and its share price has surged nearly 60% in the last year. Can a Big Mac Burrito be far off?