Weight-loss drugs hurt snack company shares

The adoption of weight-loss drugs such as Wegovy and Ozempic recently resulted in Danish drugmaker Novo Nordisk becoming the most valuable company in Europe. The aforementioned drugs suppress appetite; what might this mean for snack companies?

The effect has been “negligible” thus far, PepsiCo chief executive Ramon LaGuarta told analysts last week. The company felt confident enough to hike its full-year forecast.

Concerns about weight-loss drugs hurting sales are “overblown”, say Citi analysts. Nevertheless, investors are worried. PepsiCo shares are down 11 per cent this year and recently hit their lowest level since October 2022. The sell-off in PepsiCo and other big snack companies gathered pace recently after Walmart said weight-loss drugs were already resulting in reduced spending on food.

Analysts at Bernstein and Morgan Stanley have argued weight-loss drugs may ultimately have a big and lasting impact on food consumption habits. Perhaps, but this doesn’t necessarily justify the recent agonising over snack company share prices.

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Changes are already afoot in the food sector, with the likes of PepsiCo increasingly introducing smaller and healthier offerings. Bullish shareholders will argue successful companies don’t stand still in the face of changing trends – they adapt.