Ozempic threat is causing a selloff in sweets, cigarettes, and beer stocks

A survey conducted by Morgan Stanley found that patients tended to cut back on meals and snacks while taking weight loss drugs

The impact can already be seen on shopping demand from people taking Ozempic, Wegovy and other appetite-suppressing medications.

The bad news keeps piling up for the makers of everything from soft drinks to chocolate and booze.

The latest blow took the form of comments from US supermarket giant Walmart, which said it is already seeing an impact on shopping demand from people taking ozempic, wegovy, and other appetite-suppressing medications. 

That sent shares of food and beverage companies sliding, some to multiyear lows.

In Europe, chocolatier Lindt tumbled almost 5% and Budweiser maker Anheuser-Busch InBev lost 2.5%. 

Nestlé dropped as much as 3.4%, the most since May, dragging down the benchmark Stoxx 600 Index. 

Ben & Jerry’s ice cream maker Unilever and French yoghurt producer Danone also fell.

The selloff is “clearly an ongoing reaction from Walmart’s comments”, said Bruno Monteyne, an analyst at Bernstein.

On Wednesday, Walmart CEO John Furner said the company was already seeing an impact on food-shopping demand from people taking the drugs.

“We definitely do see a slight change compared to the total population, we do see a slight pullback in overall basket,” he said.

“Just less units, slightly less calories.”

The Arkansas-based retailer is studying changes in sales patterns using anonymised data on shopper populations. 

It can look at the purchasing changes among people taking the drug and can also compare those habits to similar people who are not taking the shots. 

Mr Furner said it is too early to draw any definitive conclusions about the appetite-suppressing drugs.

An increasing number of CEOs and investors are making similar comments. 

The CEO of the maker of Pringles and Cheez-Its said the firm is studying their potential impact on dietary behaviours.

“Like everything that potentially impacts our business, we’ll look at it, study it and, if necessary, mitigate,” Steve Cahillane, the CEO of Kellanova said.

In the markets, consumer stocks have been falling for some time, especially as inflation squeezes household incomes. 

The industry also tends to pay hefty dividends that look less appealing for investors compared with 5% interest at money market funds. 

A measure of food, beverage, and tobacco stocks in the Stoxx 600 is trading at the lowest in two-and-a-half years.

The trend is similar in the US. 

Consumer staples are the third-worst performing among S&P 500 sectors so far this quarter and the group, which includes the likes of Walmart, Mondelez International, and Pepsico, has dropped 9.1% this year.

Given the rapid popularity of this new class of weight-loss drugs and an early warning from one of the biggest retailers, it has been enough to spark another round of selling. 

A recent survey conducted by Morgan Stanley found that patients tended to cut back on meals and snacks while taking weight loss drugs, and also consumed less alcohol and carbonated drinks.

A report by strategists at Barclays found drugs used for weight loss like ozempic pose a real risk to companies ranging from fast food restaurants to cigarette makers, and credit market prices do not fully reflect the potential downside.

Their growing popularity could hurt demand for companies including PepsiCo, McDonald’s, and cigarette maker Altria Group, said Barclays.

“The impacts of GLP-1s potentially introduce disruption into a number of industries,” the strategists wrote. 

Some companies will benefit from the proliferation of these drugs, they said. 

CVS Health, for example, could benefit if more consumers get prescriptions for these drugs, and its Aetna health insurance division could benefit if people lose weight. 

A spokesperson for Pepsi declined to comment, citing a quiet period before earnings.

Still, there is some scepticism about whether the medications will actually cause major changes in consumer buying habits.

Investors like Richard Saldanha, global equity fund manager at Aviva Investors, caution against reading too much into the stock-market swings.

“Whilst we know that these drugs do tend to result in suppressed appetite, we think the moves in the share prices do feel somewhat overdone,” he said.

“It is far too early to make sweeping conclusions on what this might mean for consumer habits.”

Last month, Nestlé’s outgoing chief financial officer François-Xavier Roger played down fears the new drugs would hit big food companies, saying the dropout rates were high and that most of Nestlé’s categories are protected.

Confectionery, milk, and milk products and prepared dishes and cooking aids represent around a third of Nestlé’s sales. 

Shareholder groups criticised Nestlé this week for not being ambitious enough in making its portfolio healthier.

“If you are a fast-food outlet in an area where the bulk of consumers are on these drugs you are going to be hurt,” said Jon Cox, head of European consumer equities at Kepler Cheuvreux.

“For large international companies, it will be an irritant at worst.”

• Bloomberg