An explosion in the popularity of weight-loss aiding drugs like Ozempic and Wegovy has had retailers in a panic over how much shoppers’ waning appetite will hurt their bottom line.
Now, the maker of KitKat appears to be preparing for a downturn by creating items that might complement the typical GLP-1 user.
Speaking to Bloomberg, Nestle’s CEO Mark Schneider said the group was working on “companion products” for people using weight-loss aiding drugs to ensure their diet is nutritionally complete.
“When you eat less, you have certain needs of vitamins, minerals and supplements,” Schneider said. “You want to be sure that the weight loss gets supported. You want to be sure that you limit the loss of lean muscle mass.”
GLP-1 drugs like Ozempic and Wegovy were brought on the market to treat Type-2 diabetes, but have found mass appeal thanks to their ability to help users lose weight. A significant share of people getting thinner might be expected to weaken demand for retailers, as they require fewer calories.
Nestle’s chief financial officer Francois-Xavier Roger told Bloomberg in September that people had been eating less globally since the start of the year. While he said the reason was still unclear, Roger didn’t think the effects would be long-term.
Nestle posted lower than expected nine-month revenue targets Thursday, based on Reuters data, blaming increasing resistance to price rises among shoppers as inflation and rising interest rates take their toll.
However, the group maintains that GLP-1 drugs didn’t contribute to the company’s revenue miss.
A spokesperson for Nestle, which also stocks Starbucks’ ready-to-drink line, said the group had “not seen any impact from (weight loss drugs) on our sales,” Reuters reported.
The group has also sought to remind investors that products like chocolate and frozen pizza make up a small portion of their revenues compared with bottled water and dog food, safeguarding it even if GLP-1 drugs affect demand for its less healthy offerings.
Trouble for retailers
Nestle’s optimistic take on the weight-loss craze is the latest from retailers scrambling to reassure markets that the drugs won’t have a material impact on their sales.
So far though, investors aren’t convinced. Short interest in McDonald’s, Chipotle, and Starbucks jumped in recent weeks amid a surge in popularity for GLP-1 drugs, Bloomberg reported.
Rising interest rates, which have weakened consumers’ discretionary spending, have also been to blame.
Analysts have predicted pain for fast-food outlets where appetite suppressants are heavily used, but cautioned against reading too much into recent volatility among big retailers like Walmart.
Meanwhile, shares in Ozempic maker Novo Nordisk have surged nearly 50% this year to see it leapfrog Bernard Arnault’s LVMH and become Europe’s most valuable company.
While food sellers are hopeful the impact of weight-loss aiding drugs will be mild, the results so far are mixed.
In October, Walmart’s US CEO John Furner told Bloomberg the retail giant was witnessing a dampening in demand from customers on appetite suppressants.
We definitely do see a slight change compared to the total population; we do see a slight pullback in overall basket,” Furner said. “Just less units, slightly less calories.”
Walmart used anonymized shopper data to understand the spending behavior of customers on drugs like Ozempic and Wegovy compared with typical shoppers.
PepsiCo’s CEO Ramon Laguarta, however, told investors earlier in October that the impact of the drugs on sales of its soft drinks was currently “negligible.”