Dive Brief:
- PepsiCo CEO Ramon Laguarta told analysts the snacking and beverage giant is closely watching the growth of weight-loss drugs such as Ozempic and Wegovy but the impact on his business has been “negligible” so far.
- In the company’s quarterly earnings call, Laguarta said there are “obviously a lot of question marks” when it comes to the use of the drugs and what impact they will have on eating and drinking habits.
- If the use of appetite-suppressing medication becomes more widespread, it could cause consumers to cut back on purchases of food and beverage items or turn to less calorie-intensive products as people look to watch their weight.
Dive Insight:
With mounting concerns that weight-loss drugs such as Ozempic and Wegovy could be a threat, CPG companies are keeping a close watch. Food and beverage companies, including PepsiCo, Coca-Cola and Mondelēz International, have seen their shares hit in recent weeks amid concerns that these drugs could significantly dampen sales.
This threat potential was further amplified last week when Walmart’s U.S. chief executive John Furner told Bloomberg that it observed customers who are taking the drugs are having a “slight pullback in overall basket” sizes and “less units, slightly less calories.”
Even before these appetite-suppressing drugs gained widespread attention, food and beverage companies were moving to curtail sugar and salt in their products, while adding healthier ingredients in response to consumer demand. Many companies also have introduced smaller package sizes and turned to alternative sweeteners to make their products more attractive to shoppers.
While weight-reducing drugs don’t appear to be a major factor for CPG companies in the food and beverage space right now, PepsiCo and other firms are wise to be keeping a close watch on them to see if that might change and whether they need to change their innovation strategy as a result.
Laguarta said for now, PepsiCo, which manufactures Fritos, Sun Chips and its namesake cola, is watching the move toward healthier eating and the continued growth in snacking and mini-meals. He also noted that the company has spent the last half-decade improving the health of its products through the reduction of fat, sugar and portion sizes, while using new cooking methods for some of its snacks.
“Those are all very positive trends that will help us pivot the portfolio if needed in the future,” he said. “Our portfolio strategy, we think, is very solid when it comes to a potential protection against some of these future developments five, 10 years from now.”
Conagra CEO Sean Connolly told investors last week that the Banquet and slim Jim maker has a team of scientists looking at the data to assess food consumption patterns and determine which ones need to be incorporated into its product development.
“The key to navigating these kinds of just constantly evolving consumer environment is you have to be externally focused, you’ve got to study these consumer trends and you’ve got to rapidly design in what the consumer is looking for into your products and that’s what we do every year,” he said.
