How Anti-Obesity Drugs are Reshaping Consumer Behavior

In the wake of rising obesity rates, a new class of anti-obesity medications has emerged, creating ripples across the consumer landscape.

The surging interest in GLP-1 anti-obesity drugs like Ozempic and Wegovy is not only altering individual eating habits but also has broader implications for various sectors of the economy.

Wegovy, an injectable prescription medicine, is designed for adults grappling with obesity (BMI ≥30) or overweight issues (BMI ≥27) alongside other weight-related medical conditions. It aims to aid individuals in shedding weight and maintaining it when coupled with a reduced-calorie diet and enhanced physical activity.

On the other hand, Ozempic, or semaglutide, received the U.S. Food and Drug Administration (FDA) approval in 2017, specifically for adults with type 2 diabetes. Administered as a weekly injection, Ozempic operates by prompting the pancreas to produce more insulin, thus aiding in the regulation of blood sugar levels.

While it's not officially sanctioned for weight loss, some healthcare providers are prescribing Ozempic off-label to assist individuals in their weight loss journeys.

The core of the transformation lies in the medications' ability to significantly reduce appetite and calorie consumption. Samantha Greenfield, a finance professional, recounted to Newsweek her experience with Novo Nordisk's Wegovy, which led to a nearly 15 percent reduction in her grocery expenses and less frequent take-outs from local diners.

Morgan Stanley's analyst Michelle Weaver highlights that individuals on these medications are observing a 10 to 20 percent decline in body weight alongside a noticeable dip in appetite, leading to a meaningful reduction in calorie consumption of 20 to 30 percent. It's a narrative echoed across the board, with individuals reporting lesser cravings for high-calorie, high-fat, and sugary foods.

Weaver said the ripple effect of the dietary shift is apparent in various market sectors. In the packaged food industry, companies need to brace for potential headwinds as consumers cut back on sugary drinks, baked goods, and salty snacks. Fast food restaurants, known for their high-calorie offerings, are perceived to be at risk. However, fast casual brands with healthier offerings and restaurants with flexible menu options could stand to benefit.

On the flip side, some executives are saying the data already proves that the drugs are having an effect on consumer behavior. Recently, Walmart's U.S. CEO, John Furner, told Bloomberg that the company is beginning to notice a trend among customers taking Ozempic—they are buying less food. By mining its own pharmacy and grocery data, Walmart pinpointed customer buying patterns specific to this demographic.

"We definitely do see a slight change compared to the total population, we do see a slight pullback in overall basket," Furner said. However, other executives say it's too early to tell if this is a real long-term headwind. Interestingly, while food purchases saw a dip, the drug spurred sales of other items at Walmart.

Meanwhile, the Wall Street Journal reports a measured response from many food executives who have navigated dietary trend waves before, from low-fat to low-carb diets. Conagra's CEO Sean Connolly sees any significant drop in calorie consumption due to the drugs as a distant possibility. If the trend does gain traction, Connolly believes the food industry could respond with new offerings, including products in smaller packaging sizes.

Bob Nolan, Conagra's Senior Vice President of Demand Science, shared that his team began studying Ozempic and similar drugs last fall. While social media buzz around the drugs isn't as loud as other weight-loss programs like the keto diet, Nolan anticipates a shift once the drugs become available in pill form, making them more accessible.

The expectation is that a reduction in calorie intake will steer consumers towards higher-quality food options. Conagra sees itself well-positioned to meet this emerging consumer preference and is ready to design new products if needed.

A cautious, yet proactive approach from industry leaders is forming as they evaluate and adapt to the consumer behavior shifts driven by the advent of anti-obesity medications.

The apparel industry is also catching the wave of the shift. The Morgan Stanley analyst said there could be an uptick in sportswear apparel and casual attire purchases as individuals begin exercising more and change clothing sizes.

Despite the promising results of the weight loss drugs, recent studies have shed light on potential adverse effects associated with their use. A study published in the JAMA Medical Journal earlier this month revealed that Novo Nordisk's GLP-1 drugs, including Ozempic, Wegovy, and Saxenda, were linked to a higher risk of gastrointestinal issues such as bowel obstructions when compared to an older weight-loss medication called Contrave.

The researchers found that patients on these GLP-1 drugs were about nine times more likely to experience swelling of the pancreas. Other noted side effects included delayed stomach emptying, known as gastroparesis. The data is consistent with known side effects in patients with type 2 diabetes but casts a new light on potential complications for individuals using them for weight loss purposes.

The study's authors opined that the risk-benefit calculus might differ for individuals using these drugs for weight loss compared to those using them for diabetes management. While Novo Nordisk stands behind the safety and efficacy of its GLP-1RA medicines when used according to approved indications and under professional supervision, the findings suggest a need for a careful evaluation by healthcare providers and patients alike.

Despite some unpleasant side effects like nausea, diarrhea, and vomiting, the increasing popularity of the drugs, driven by their significant weight loss results, has led to concerns about more serious outcomes, including suicidal thoughts and thyroid cancer. In September, the FDA added a warning to Ozempic's label to account for reports of blocked intestines in some patients, a warning also appearing on labels for Wegovy.

Still, a notable economic impact is unfolding in Denmark, home to Novo Nordisk. The booming sales of the two drugs have not only propelled Novo Nordisk's market capitalization to over $337 billion, but have also contributed to a 1.7 percent growth in Denmark's economy in the first half of 2023.

Novo Nordisk's success story has bolstered Denmark's pharmaceutical industry, placing it as Europe's second-most valuable business, behind luxury brand LVMH.

While the long-term adoption and impacts of the anti-obesity medications remain to be fully understood, the initial signs point towards a potential reshaping of consumer behavior and market dynamics.