The Rise of Weight Loss Drugs Threatens the Snack Industry’s Growth

The Rise of Weight Loss Drugs Threatens the Snack Industry’s Growth

Food companies have been heavily investing in the snacking market, but the growing popularity of weight loss drugs like Wegovy and Ozempic could pose a threat to their future sales growth. These pharmaceuticals, known as GLP-1 agonists, suppress appetites and are being prescribed to help patients lose weight. As their usage increases, there is a concern that people taking these drugs may develop aversions to high-sugar and high-fat snacks, impacting the sales of popular snack brands like Oreos, Doritos, and Hershey’s Kisses.

Millennials and Generation Z consumers, who tend to snack more often than older generations, are driving the growth in the snacking trend. This has prompted food companies to focus more on snacks, as other grocery aisles experience stagnating sales. The savory snack market is expected to grow 6% annually from 2022 to 2027, while sweet snack sales are projected to rise 4.6% annually during the same period.

However, Morgan Stanley estimates that the number of patients taking GLP-1 drugs could reach 24 million, or nearly 7% of the U.S. population, by 2035. This could potentially lead to a 3% decline in the consumption of baked goods and salty snacks. If the new eating habits of people using these drugs extend to their households and friends, the decline in snack sales could be even greater.

Despite these concerns, there are factors that could work in favor of snack sales. The high cost of GLP-1 drugs, at around $1,000 per month, may make them unaffordable for many consumers. Additionally, those who consume the most junk food are often lower-income individuals, who are unlikely to be the primary users of these drugs.

Furthermore, the inconvenience of self-injecting the drugs once a week and the fact that their effects disappear if treatment is discontinued could also deter widespread adoption. Until these drugs come in a more affordable form, such as a pill, their impact on the snack industry may be limited.

While food companies may experience slower sales growth in the long term and may need to adjust their portfolios, they will have time to adapt to shifting consumer behaviors. Companies like PepsiCo and Mondelez have already made efforts to acquire smaller brands that offer healthier snacks. However, transforming these brands into global powerhouses will take time.

In conclusion, the rise of weight loss drugs poses a potential threat to the snack industry’s growth. While the impact may not be immediate, food companies will need to innovate and reshape their portfolios to meet changing consumer preferences and navigate the evolving landscape of the snacking market.

– Accenture, Trilliant Health, and Morgan Stanley research

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