Welcome to Extreme Investor Network, where we provide unique insights and analysis on the latest trends in the investing world. Today, we are diving into the impact of GLP-1 drugs on the salty snack industry and the implications for investors.
GLP-1 drugs like Ozempic, Wegovy, and Zepbound have been hailed for their effectiveness in helping patients with diabetes and obesity manage their blood sugar levels, hunger, and weight. However, a recent Morgan Stanley survey has raised concerns about the potential impact of these drugs on salty snack sales.
The survey found that patients on GLP-1 drugs reduced their consumption of confections, cookies, and sugary drinks significantly. This has led some investors to worry that the growing usage of these drugs could negatively affect food and beverage companies like Pepsi, which dominates the salty snack category with brands like Doritos, Fritos, and Lay’s.
However, a team of Barclays analysts led by Lauren Lieberman has offered a different perspective. They conducted a study on Pepsi’s “Summer of Lay’s” promotion, which involved lowering prices on Lay’s potato chips. The analysts found that the temporary price reduction led to an increase in both volume and sales of the product, suggesting that affordability, not GLP-1 drugs, may be the primary challenge facing the salty snack category.
Analysts like Robert Moskow from TD Cowen also attribute the slowdown in snacking to price sensitivity and the return-to-office trend. Moskow believes that food and beverage companies need to adapt by offering products with a healthier image to cater to consumers on GLP-1 drugs who may seek higher-protein solutions or ready-to-drink beverages over traditional snacks.
While GLP-1 drugs may pose challenges for the industry in the coming years, the full extent of their impact remains uncertain. Companies like Pepsi will need to stay ahead of the trend by innovating and repackaging their products to meet the changing needs of consumers.
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