Drug manufacturer Novo Nordisk’s (NYSE:NVO) weight loss injection, Ozempic, has caught consumers’ attention in a big way. Even so, the debate remains as to whether this frenzy will continue long-term or will just be a short-sighted bubble. Snack companies such as Campbell Soup (NYSE:CPB), Conagra Brands (NYSE:CAG), Mondelez (NASDAQ:MDLZ), Hostess (NASDAQ:TWNK), and Hershey (NYSE:HSY) are under the radar for the potential impact of the muted consumer appetite from the drug’s intake.
Ozempic shrinks the consumer’s appetite, thus reducing food consumption and resulting in weight loss. Scores of health-conscious American consumers are running to drug stores to get their hands on magical weight-loss drugs. Snack companies and candy manufacturers are at the receiving end of the direct implications of this drug’s widespread use. When a consumer becomes diet-conscious, his/her first move is to turn towards healthy food and reduce the consumption of snacks and candies.
However, snack companies are viewing the current craze of Ozempic as overhyped and short-lived. The main reason is its high price tag and the fact that it’s not an oral medication. Plus, the drug comes with many side effects, including nausea, diarrhea, etc., that are unpalatable to many consumers. Apart from Novo Nordisk’s Ozempic, which is a drug to treat type 2 diabetes, NVO also manufactures Wegovy, specifically designed as a weight loss drug. Further, Eli Lilly (NYSE:LLY) manufactures Mounjaro, again a type 2 diabetes medication that is also used for weight loss.
Analysts Worry About Ozempic’s Long-Term Impact
A Wall Street Journal report, citing Morgan Stanley data, stated that by 2035, nearly 7% of the U.S. population (24 million people) would be on weight-loss drugs. The drugs would propel them to cut their calorie intake by 30% daily. The figures reflect a huge chunk of the population that could well be the ones who are binging on snacks and candies daily. Since the launch of these drugs, Wall Street analysts have been trying to calculate the financial impact on snack companies.
Reportedly, packaged food companies are already witnessing a slump in demand as the macroeconomic headwinds dampen consumer sentiment. With the growing use of weight-loss drugs, these sales could fall even more.
Meanwhile, Conagra CEO Sean Connolly said that if there is indeed a significant drop in calorie consumption due to the drugs, the company is prepared to produce and sell smaller portions of existing snacks as well as manufacture newer pro-health foods. Conagra already sells some highly health-conscious foods, such as Conagra’s Healthy Choice and Marie Callender’s frozen meals, and is prepared to launch more if the situation demands it. In the meantime, Mondelez is already promoting its “portion control” snacks that contain fewer than 200 calories.
With this background in mind, let us see how these snack companies compare on the TipRanks Stock Comparison Tool.
From the above comparison, we can see that currently, Wall Street has the highest conviction on Mondelez stock. MDLZ has a Strong Buy consensus rating, a Perfect 10! Smart Score on TipRanks, and a decent upside (20.6%) potential from current levels.
