Weight loss drugs like Ozempic and Wegovy still scare financial advisors when it comes to investing money in junk and fast food companies.
Some experts say these companies, already struggling to cope with an increase in health-conscious customers, could face a decline in tobacco use as drugs that reduce cravings and help people feel fuller for longer gain popularity.
Donut company Krispy Kreme is the latest company to feel the effects of the weight loss movement, with its share price falling on Monday.
Investment advisory firm Truist Securities downgraded shares of Krispy Kreme to “Hold” from “Buy” and lowered its price target from $20 to $13. It noted the uncertain impact that drugs like Ozempic and Wegovy could have on packaged snacks.
Donut company Krispy Kreme became the latest company to feel the effects of the weight loss movement as its share price, the value of a company’s stock, fell on Monday.
Research has found that 73 percent of people who took weight loss drugs ate less sweets, including candy, chocolate, and some baked goods.
The company’s financial analysts are no longer recommending investors buy Krispy Kreme stock.
Downgrading shares to “hold” means that people who have invested money in the company are not allowed to do anything – neither buy nor sell.
Shares of the donut company fell as much as 3.6 percent on Monday, but overall shares are up 25 percent since Monday’s close.
Bill Chappell, a financial-equity analyst at Truist Securities, wrote in a note to investors on Monday that the company finds it difficult to recommend Krispy Kreme to investors because it has “no idea” what impact weight-loss drugs will have and how long does it last. will take time. will remain, although Chappell speculated that it would not go away for six to 12 months, “if not longer.”
The boom in weight loss drugs has reduced financial advisers’ confidence in many stocks of companies that make junk or sugary foods, and the entire industry is facing a potential crisis.
At the beginning of the month, investment bank Barclays lowered its recommendation for Swiss chocolate maker Barry Callebaut and German sugar company Südzucker.
Analysts said that weight loss drugs face the risk of falling share prices.
Major banks such as Morgan Stanley predict that by 2035, 24 million people, or seven percent of the US population, will use weight loss drugs.
An analysis by the bank also estimates that patients prescribed the drugs will consume a quarter of the sweets, confections and other junk foods they once did – saving billions of dollars in annual revenue.
A survey conducted by Morgan Stanley found that 73 percent of people ate less sweets, including sweet candles, chocolate and some baked goods
Major players in the fast food industry such as McDonald’s, Burger King and Yum Brands, owner of KFC and Taco Bell, may see a decline in demand
Pamela Kaufman, a food analyst at Morgan Stanley, said in a report: “The food, beverage and restaurant industries may see weaker demand, particularly for unhealthier foods and higher-fat, sweet and salty options.”
READ MORE: Is Wegovy a panacea for addiction? Patients say that they are cured of alcohol and cigarette habits after weight loss treatment
Wegovy was originally developed for the treatment of type 2 diabetes to control blood sugar levels. However, it is now also approved to help you lose weight.
The new class of drugs can lead to a 20 to 30 percent reduction in daily calories and people tend to eat fewer foods high in sugar and fat, meaning makers of chips, cookies and pastries could face a setback, while banks record a decline. Consumption is predicted to increase by up to three percent by 2035.
Research from Morgan Stanley found that 73 percent of people who took the weight-loss drugs ate less sweets, including candy, chocolate and some baked goods.
That drastic reduction could spell trouble for the mega-producers of these foods, including Krispy Kreme, Oreo maker Mondelez International, Nestlé, which makes Hot Pockets and Häagen-Dazs, and Kraft Heinz, which makes products like Jell-O and macaroni. and cheese.
Such companies dominate the global snack food market, which is currently worth half a trillion dollars, and face declining demand – possibly by billions of dollars.
Although the negative impact is likely to occur gradually, companies are already unsettled and investors and top executives are starting to worry.
A recent analysis shows that executives at junk food companies are increasingly talking to investors about the drugs.
Reuters Breakingviews combed through transcripts of company presentations, events and earnings calls – a conference call between company management, financial analysts, media and investors.
In 2022, 18 mentions of Wegovy, Ozempic and Mounjaro were found. So far in 2023, at least one of these drugs has been mentioned at least 71 times in phone calls.
Despite Chappell’s advice earlier this week, he said he believes in Krispy Kreme, noting that the company will grow in 2023 as it “continues to refine its business model”.
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Crystal Leahy is an author and health journalist who writes for The Fashion Vibes. With a background in health and wellness, Crystal has a passion for helping people live their best lives through healthy habits and lifestyles.
