Weight loss pills impact food demand, Walmart: "Drug users" eat less and may impact the food industry.

The popular weight loss drugs that have swept the world are not only affecting the health of many patients, but also causing several pharmaceutical companies to shine in the financial market this year. Their impact is even broader than that. The latest market awareness reveals that the food industry, including Walmart, has also been affected because the demand for food has been impacted by weight loss drugs, and customers who "take drugs" are eating less and less.

Novo Nordisk (NVO) and Eli Lilly (LLY) have launched two new weight loss drugs called Ozempic and Wegovy, which are GLP-1 receptor agonists. It is said that these drugs are expected to help patients lose weight by 20% and reduce the risk of heart attacks or strokes. They are considered the most effective and safest weight loss drugs in history, and the number of users is increasing. However, the popularity of weight loss drugs undoubtedly leads to a reduction in food intake, especially in the fast food industry where high-calorie foods are at risk.

ZeroHedge, a financial blog, analyzed that these two drugs may cause a revolution in the American catering industry, pointing out that the American food industry, which is lying in its comfort zone, has been reluctant to change and believes that Americans' obsession with fast food, hamburgers, and other high-carbohydrate junk food will not change. The current value of the American food industry is nearly 1 trillion US dollars, and any small change will cause a huge shock to the industry.

Morgan Stanley predicts that these two weight loss drugs may reduce calorie consumption in the United States by up to 1.7% in the next 11 years, and up to 8% of the population in the United States will take weight loss drugs.

It is not surprising that Morgan Stanley found that fast food, pizza, and other high-carbohydrate foods, as well as candies, pastries, salty snacks, sugary drinks, and snacks, are most affected by weight loss drugs.

In addition, retail giant Walmart recently issued a warning, stating that consumers who are taking Ozempic, Wegovy, and other weight loss drugs have reduced their shopping demands. Walmart CEO John Furner said, "We have confirmed that consumers who are taking medication do shop slightly less and buy slightly fewer items compared to the overall population, and their calorie consumption is also slightly reduced."

Walmart also compared consumers who purchased these drugs at its pharmacy with those who did not, and found that the former purchased less food.

Ozempic and Wegovy are available at Walmart pharmacies. Data shows that the sales of these two drugs have increased by 300% from 2020 to 2022. Walmart CEO Doug McMilon stated in August of this year that the hot sales of Novo Nordisk and Eli Lilly's weight loss drugs are beneficial to Walmart's revenue, but obviously detrimental to high-calorie fast food consumption. He predicts that sales of daily consumables such as food, as well as health products driven by the popularity of weight loss drugs, will continue to grow by 1% in the second half of the year.

The stocks of several major fast food chains and food companies slipped during trading on the 6th local time. McDonald's (MCD) fell more than 1.2%, Yum Brands (YUM) fell more than 1.5%, and Kellogg (K) fell more than 2.5%. Among several retailers, Walmart (WMT) fell nearly 2.6%, Costco (COST) fell 2.3%, and Walgreens (WBA) fell more than 1.4%. In contrast, weight loss drug manufacturers saw significant gains, with Novo Nordisk (NVO) rising more than 2.7% and Eli Lilly (LLY) rising more than 3.3%.

Although more and more executives and investors are discussing how the popularity of weight loss drugs will change the US economy and business environment, many CEOs still have high hopes for the future of the US obese population consuming junk food.

Earlier this week, Steve Cahullane, CEO of snack company Kellanova, which spun off from Kellogg, said the company is studying the potential impact of changing dietary habits. He said the use of weight loss drugs is still in its very early stages, "but like all other factors that impact our business, we will pay attention to and study it, and if possible, we will try to minimize the impact."

He also said that for Kellanova, a practical approach may be to increase penetration in both the US and other markets, finding consumers who are interested in snack products and can establish a certain level of brand loyalty.