The rise of weight-loss drugs isn’t only shrinking Americans’ waistlines, it could also shrink food corporations’ bottom lines. 

Some experts predict junk food companies – already battling a rise in health conscious customers – could face a tobacco-like demise due to drugs like Ozempic and Wegovy, which reduce cravings and make people feel full longer. 

Big banks, such as Morgan Stanley, predict 24 million people, or seven percent of the US population, will be taking weight-loss drugs by 2035. 

An analysis by the bank also predicts patients prescribed the drugs will consume one-quarter of the candy, confectionary and other junk food they did before – slashing billions of dollars from annual revenue.

And corporations are already spooked. A recent analysis found executives at junk food companies are increasingly talking about the medications with investors. 

Morgan Stanley’s food analyst Pamela Kaufman said in a report: ‘The food, beverage and restaurant industries could see softer demand, particularly for unhealthier foods and high-fat, sweet and salty options.’ 

The new class of medications can lead to a 20 to 30 percent reduction in daily calories, and people tend to eat less high-sugar and high-fat foods, meaning the makers of chips, cookies and baked goods could take a hit, with banks predicting a drop in consumption by as much as three percent through 2035.

While any negative impacts are likely to be gradual, investors and c-suite executives have already begun to worry. 

Reuters’ Breakingviews scoured the transcripts of corporations’ presentations, events and earnings calls, which is a conference between the management of a company, financial analysts, media and investors.

It found in 2022, there were 18 mentions of Wegovy, Ozempic and Mounjaro. So far in 2023, at least one of these drugs was mentioned in calls 71 times.  

Morgan Stanley’s research found 73 percent of people on the weight loss drugs ate less confectionary food, which includes sugary candy, chocolate and some baked goods. 

Seventy percent of people consumed fewer sugary drinks; 69 percent ate less cookies; and 67 percent reached for fewer salty snacks. 

These drastic reductions could spell trouble for the mega-producers of these types of food, including Cadbury and Oreo producer Mondelez International, Nestle, which makes Hot Pockets and Häagen-Dazs, and Kraft Heinz, which produces products like Jell-O and Kraft Mac and Cheese. 

These companies dominate the global market for snacks, which is currently valued at half a trillion dollars, and they should brace for falling demand.

The hospitality industry is also taking a hit. The same survey found 77 percent of people on weight-loss drugs took fewer trips to fast-food establishments and 74 percent ate at pizzerias less. 

Like snack-makers, major players in the fast food industry, such as McDonald’s, Burger King and Yum Brands, which owns KFC and Taco Bell, could see falling demand, with analysts forecasting a drop in sales between one to two percent by 2035.

While two percent may not seem like a lot, it equates to nearly $7 billion.   

Alcohol will also take a hit from the rise in weight-loss prescriptions. Two-thirds of Americans on these medications report consuming less alcohol and nearly one-quarter stopped drinking alcohol altogether. 

Banking analysts projected US-focused alcohol companies face the highest risk and can expect a two percent decline in consumption by 2035. 

The implications of weight-loss drug approval and popularity extends beyond the food and beverage industries.

Financial analysts also predict companies that make products to treat conditions stemming from obesity could also take a hit.

Companies that manufacture products for sleep apnea, a condition in which sufferers intermittently stop breathing while asleep, will likely see a reduction in value because approximately 70 percent of sufferers are obese. 

Additionally, companies that sell joint replacements should also expect their valuations to decline. 

And rival weight-loss businesses, such as WW International, formerly known as Weight Watchers, has seen its shares plummet by about 70 percent since Wegovy was approved in June 2021. Jenny Craig, a similar business, shut down in May after more than 40 years because of growing competition from weight-loss drugs. 

Pressure on oil firms ramps up as Norway’s sovereign wealth fund throws its weight behind climate activists against Exxon Mobil and Chevron

By Calum Muirhead For The Daily Mail

Updated: 07:18 EDT, 27 May 2023

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

POPULAR MONEY SECTIONS
Take me to…

Two of America’s best-known billionaires are at loggerheads over a new Nantucket clam shack.

San Francisco Giants owner Charles Johnson, 90, is trying to block the Straight Wharf Fish Market from opening this summer over fears it will bring noise and congestion to the area where he lives.

Johnson, who is worth an estimated $5 billion, has a simple shack which sits next to the dining spot on the famed tycoons’ enclave.

But another billionaire who also has a property nearby – investment guru Charles Schwab – has come out in support of the new food venture, to the delight of its owners. 

Johnson filed suit on May 12 in Nantucket Superior Court seeking to invalidate licenses the Straight Wharf Fish Market had received from relevant authorities.

He and a group of his neighbors who have residences on the historic Old North Wharf have come out against the 62-seat eatery, arguing it will generate too much noise and congestion.

Local community boards, however, have backed the development.

Gabriel Frasca, one of the restauranteurs behind the project, said the lawsuit may delay their expected opening in July, and that the suit brought by the wealthy cohort of the resistance party had been financially draining.

‘This is one of a number of headwinds we are fighting our way through. We remain hopeful we can open this season, but it is hard to continue to throw time and money at a project that we may have to stop at any moment,’ Frasca told the Boston Globe.

Frasca and his partner Kevin Burleson plan on reviving the space that used to be known as the Straight Wharf Fish Store and Stars Ice Cream, which shut down in 2021. 

He said, at this point, it will be a challenge to meet a planned July opening date.

Johnson has asked the court to overturn the state’s April 11 approval of the restaurant’s liquor license, which was granted by the Select Board in March.

Danielle deBenedictis, Johnson’s attorney, called the decision to approve the liquor license improper due to its perceived ignorance of the ‘traffic, noise, congestion, and parking problems,’ that the restaurant may create.

Johnson’s attorney says his property would be just 18 inches from the clam shack. Though the cabin is modestly sized at just 1,200 square feet, it is valued at nearly $6.5million.

One voice who has come out as pro-clam shack is billionaire businessman Charles Schwab, 85, whose support the owners said is a pleasant surprise.

DeBenedictis had initially told the Select Board that in addition to Johnson, she represented Schwab and a number of other high profile residents of the wharf.

However, last month, Schwab declared in a statement through his attorney that he never opposed the opening of the restaurant and was never represented by deBenedictis, who is also the owner of a Nantucket restaurant and bar The Summer House, as reported by the Nantucket Current. 

An attorney for Schwab said his client had initially been concerned when notified about the project, but ‘quickly adjusted’ his position when presented with a fuller picture of the plans for the restaurant.

Schwab’s attorney wrote in an April letter to the town and state alcoholic beverages commission that ‘the Schwabs and many neighbors at Old North Wharf were originally concerned when told that the Straight Wharf Fish Market would be a nightclub with a bar, dancing, and live music.  

‘However, when a review of the permits showed this was not the case, the Schwabs decided to not oppose’ the restaurant.

‘We all look forward to enjoying a fresh clam roll and cold soft-serve twist cone on the harbor,’ the lawyer, Steve Cohen, wrote.

Schwab paid $10million in 2021 for neighboring cottages in the Old North Wharf named Nautilus and Zenas Coffin. The cottages have several boat slips between them, according to the Wall Street Journal.

Frasca said that the Schwabs have been ‘incredibly gracious’ and that the business team behind the Straight Wharf Fish Market ‘appreciate the faith that they have shown in us.’

The owners have years of experience opening and operating restaurants on the New England island. Plans for this restaurant include a 14-seat dock and menu that will offer classics like lobster and clam rolls, as well as more modern fare.

Frasca told the Globe he was ‘a little surprised’ when he was made aware of the lawsuit, but said he expects Johnson’s suit won’t be the last one facing the restaurant.

‘Really I think Mr. Johnson just doesn’t want to own property next to a clam shack. And though I understand the sentiment, that isn’t a good reason to prohibit a properly zoned business from opening,’ he said.

Despite the ongoing opposition, Frasca says he remains optimistic the restaurant will be able to open this summer.

‘Obviously, missing even a single day of those sales has an outsized impact on our ability to earn a profit,’ he said. ‘Given that most restaurants operate within a 10 percent profit margin (at best), it’s pretty easy to see what the effect of missing any part of peak season would be.’ 

Sarah Alger, an attorney representing the Old North Wharf Cooperative said she believes members of the group are generally in agreement with Johnson’s sentiments.

‘I know there’s been kind of an effort to make this into kind of a David and Goliath story. I don’t really see that as being all that accurate,’ she said. ‘You know, this whole folksy clam shack thing. It isn’t a clam shack. It’s a restaurant.’