December 10, 2023

Will Ozempic Kill Donut Sales? Krispy Kreme Stock Downgraded As Weight Loss Drugs Boom.



Truist cut its outlook Monday for shares of doughnut chain Krispy Kreme, citing the potential impact of weight loss and diabetes drugs like Ozempic, as potentially lower indulgence among Americans weighs broadly on food and beverage stocks.

Key Facts

Truist analyst Bill Chappell downgraded his rating for Krispy Kreme from a buy to a hold, and slashed his price target for the firm 35% from $20 to $13, attributing the change of heart to the “overhang” on packaged food stocks as a whole due to the recent surge in popularity of GLP-1 semaglutide drugs like Ozempic and Wegovy.

The bank said Krispy Kreme and other comparable stocks’ performance will “be stuck in a holding pattern at best” as the impact of increased usage of the medications becomes apparent, likening the industry outlook to where it stood during the initial surge in popularity of low-carbohydrate diets in the mid-2000s.

Chappell said it’s too soon to predict how big of an impact weight loss drugs will have on food consumption, but other analysts have taken a stab at what the fallout may be.

Total American calorie intake could decline between 1% and 3% by 2030, Bank of America analysts led by Bryan Spillane forecasted in a note to clients earlier this month.

Investors are buying into the notion that GLP-1s will significantly impact food stocks: The S&P food and beverage industry index is down 10% this year, far far underperforming the S&P 500’s 9% gain during the stretch.

Food producers are the “biggest loser[s]” of the weight loss drug boom, according to JPMorgan analysts led by Nick Rosato, also associating the stocks’ broad downturn with higher interest rates’ effect on expenses and shrinking pricing power with lower inflation.

Surprising Fact

The S&P’s packaged food and meats sub-index, which does not include Krispy Kreme but includes other sweet treat purveyors Hershey and Mondelez, was down 24% from mid-May through last week. That’s the packaged fare index’s worst relative performance over a five-month period against the S&P since 2000, according to JPMorgan analysis.

Crucial Quote

“We have seen a number of trends and possible disruptions come and go in consumer staples over the years, but never one quite like GLP-1s,” Rosato wrote to clients last week in a note analyzing the medications’ wide-spanning impact on the food and beverage industry. The impact of weight loss drugs is “real and potentially not small,” according to Rosato, citing beer and food delivery as items potentially most affected by associated dietary changes.

Key Background

As shares of food and beverage producers struggled, GLP-1 manufacturers’ stocks soared. Denmark’s Novo Nordisk, which produces Ozempic and Wegovy, reached an all-time high share price this year, while shares of the American producer of Mounjaro, Eli Lilly, also peaked. Only Wegovy is approved by the Food and Drug Administration for weight loss, though both Ozempic and Mounjaro are often prescribed off-label for weight management (the two drugs’ primary purpose is to treat type 2 diabetes). Analysts project the medications’ impacts to span beyond pharmaceutical and food industries. Jefferies posited last month airlines could slash fuel costs significantly if there’s a decline in passengers’ average weight, forecasting United Airlines would save $80 million per year if the average passenger lost 10 pounds.


The consequences of weight loss drugs have yet to rear their head in the results of the world’s largest fast food chain, McDonald’s, which reported its best quarterly sales in nine years Monday.

Further Reading

MORE FROM FORBESWill Ozempic Users Really Buy Fewer Groceries? Major Food Stocks Drop After Walmart Exec’s Claim.
Yahoo FinanceSurge in obesity drugs like Ozempic has pummeled big food stocks. Is it time to eat them up?
WSJAmerica’s Food Giants Confront the Ozempic Era

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