Will weight loss drugs kill the fast food business? | Food & drink industry

On a drizzly morning Luton’s takeaways are preparing for the lunchtime rush. McDonald’s is busy with shoppers, while chains from Subway to German Doner Kebab are opening their doors for the approaching army of hungry stomachs.

The Bedfordshire town is one of the UK’s worst spots for obesity, with one hospital admission linked to weight for every 20 residents in 2022. That toll is more than 10 times the rate in Bracknell Forest, Berkshire, according to NHS data.

The local council is testing ways to tackle the problem: blocking takeaways from opening near schools, banning adverts for unhealthy foods from council-run hoardings, giving families advice on health and nutrition, and trying to encourage walking and cycling.

But a new weapon could soon be in the armoury – one that could have big implications for the food industry and the battle against obesity. Weight loss drugs, such as Novo Nordisk’s Wegovy and Ozempic for diabetes, are already available on the NHS, and Eli Lilly’s diabetes drug Mounjaro, which has been approved for weight loss and, sold as Zepbound, is expected to be available in the UK soon.

The drugs have been lauded by celebrities and the super rich who boast about buying the jabs to keep their waists in trim. The Danish drugmaker Novo Nordisk’s value has swollen so much amid the weight loss drug boom that it is dominating, and even distorting, Denmark’s economy. But could they really help towns such as Luton become healthier – and what will that mean for the food industry?

The global obesity crisis

Worldwide, more than a billion people are obese and many more are overweight. On current trends, more than half of the world’s population – 4 billion people – will be overweight or obese by 2035. In the UK, a quarter of people live with obesity and 38% are overweight. The new generation of weight loss drugs is being hailed as a solution to the obesity crisis, at least in part.

The prospect of thousands of people using the appetite-suppressing drugs has spooked fast-food chains and sellers of sugary food and drinks, triggering a sell off of share prices across the food sector. The McDonald’s share price, for example, fell by 17% between the end of June and mid-October, wiping almost $38bn (£30bn) off its market value, but has since recovered.

While the drugs are expensive and it is not clear how many people will take them, food companies know they will have to adapt.

Western lifestyles – unhealthy diets featuring highly processed foods rich in saturated fats, refined sugar and preservatives, and a decline in physical exercise – have spread to other parts of the world. More than half of the adult population in India has abdominal obesity (genetically, Asian people tend to store more fat around the abdomen).

According to the World Health Organization’s definition, adults with a body mass index (BMI) from 25 to 30 are classed as overweight and those with a BMI of 30 or more as obese.

How the new weight loss drugs work

The craze for these therapies means their makers, Novo Nordisk and Eli Lilly, are struggling to keep up with demand. The treatments are injected once a week with a pen device, into the stomach, thigh or upper arm, and mimic the action of a gut hormone called glucagon-like peptide 1 (GLP-1).

When blood sugar levels start to rise after someone eats, the shots prompt the body to produce more insulin, to lower blood sugar levels. This helps control type 2 diabetes, but also helps curb hunger. The drugs suppress appetite and slow the movement of food through the digestive system, so people feel full faster and for longer, and eat less.

While the drugs have helped people lose substantial amounts of weight, potential side effects range from nausea, bloating, diarrhoea and fatigue, to more serious stomach, kidney and gallbladder problems and inflammation of the pancreas.

The two companies are also racing to come up with weight loss pills. Their US rival Pfizer suffered a severe setback with its pill in early December and abandoned trials of the twice-daily version after more than half of participants stopped taking it because of the side effects – nausea, vomiting and diarrhoea. The US firm still plans to release data on its once-daily version of the pill.

The pharma companies have been criticised for the high cost of the new medicines. In the US, the list prices for Wegovy and Mounjaro are more than $1,000 a month, and many insurers only cover diabetes but not weight loss.

John Lathrop and Tory Novakova, US analysts at the French asset manager Amundi, expect a “broad update” of the new therapies, with about 105 million people in the US and 45 million in Europe (Germany, the UK, France, Italy and Spain) eligible for them. By the end of the decade, they forecast $80bn annual spending on these drugs.

Rebecca Tobi, the senior business and investor manager at the Food Foundation, a UK charity, says: “These drugs will be hugely useful for some people, but we need to see them as treatment and not prevention.

The food industry

For now, food bosses appear sanguine about how big the impact will be. The Walmart US chief executive, John Furner, said recently that people taking the drugs were buying less food: “Just less units, slightly less calories.”

Analysts at Morgan Stanley estimate consumption of fizzy soft drinks, baked goods and salty snacks in the US could fall by up to 3% by 2035.

They estimate that 24 million people, or 7% of the US population, will be taking the new GLP-1 drugs by 2035. A survey carried out of 300 patients taking the shots showed they ate less and cut back the most on foods high in sugar and fat. About 90% of those using the drugs said their snacking declined and 77% said they visited fast-casual restaurants less often.

Tobi says: “If people eat less, that is a threat to how a lot of large food business systems are set up in that they make a profit, the greater volumes of food they sell.”

However, food industry bosses are not anticipating a big impact on sales as they bet that take-up of the drugs will remain relatively low and users will continue buying their favourite brands – just in smaller portions.

“We’re seeing no impact today with GLP-1s and GLP-2, nobody has any idea what the impact is going to be in the future,” McDonald’s boss Chris Kempczinski told Yahoo Finance recently.

Cadbury’s owner Mondelēz says that over the next 10 years it expects weight control jabs to hit sales volumes by no more than 1% globally but has yet to see any impact on its business.

“Most of the food grocery companies came out with a low single-digit impact,” says Novakova at Amundi. “And these companies are well aware of these risks and will be able to adapt if necessary.” That could be through reducing portion sizes, or using healthier ingredients.

Mondelēz says the company is “well positioned to help consumers snack more mindfully”. “We feel the impact has been a little overblown recently, and it’s important to put it into perspective.”

Rick Miller, the associate director of food and drink research at Mintel, says: “I don’t think it is going to be the wild dramatic impact being suggested by some.”

Miller says it is unclear if the drugs will stand the test of time or fade out like previous drugs, “which were shown not to be effective in the long term”. The need to inject the drugs and the expense are also seen as offputting to all but those most in need of weight control.

Even if the jabs are widely taken up in the long term, “people might eat less but better quality”, Miller says. “Some brands have already made that repositioning in the face of reduction in portion size targets in the UK.”

Another possible line is “fortification food” – drinks or snacks that have added vitamins and minerals to help people meet daily nutritional requirements while eating less. Miller adds: “Something smaller but has got everything you need.”

That idea is supported by Nestlé which says: “We are already working on a wide number of products that could serve as a very helpful companions during the course of the treatment involving weight loss drugs.”

The Swiss food company highlighted its high-protein products such as Optifast and Vital Protein that help preserve lean body mass during weight loss, and multivitamin supplements such as Nature’s Bounty to fill nutritional gaps with reduced-calorie intake.

Another big UK food retailer says it has yet to begin working on a response to the diet jabs as the perceived market is far too small, as a mix of shortages in the UK and restricted access via the NHS keep a lid on usage. A source there says it would be simple to adapt food ranges should the drugs become popular. “We could just do half portions [on ready meals]. Every bite has got to count and engage your senses. It has got to pack a punch.”

Some brands and product categories will be harder hit than others.

Jennifer Creevy, the director of food and drink at the trends agency WGSN, says: “Consumers will always want treats but will be looking for tasty and healthy versions. Businesses that have healthy, better-for-you alternatives among their portfolios and invest even further here will win.”

She suggests companies will begin to produce “companion products that support consumers after they stop taking these medications to ensure they don’t regain weight” – “complete nutrition products designed to keep you fuller for longer”.

Analysts at Goldman Sachs looked at sales data which suggested women in their mid-40s to mid-50s were the most likely users of weight loss drugs.

They found that these women were not cutting back on chocolate or alcohol as much as might be expected but were buying more beauty products and switching to smaller treats such as mini muffins so that overall food consumption was down – except chocolate.

What investors think

To figure out the impact of the new drugs, Moritz Dullinger, a fund manager at Pictet Asset Management in Zurich, has been scanning company statements and transcripts of earnings calls with the help of artificial intelligence, and trawling through message boards manually to look at real-life feedback from patients.

“What some people underestimate is that in 10 years, the first GLP-1 drugs will be off-patent,” he says. This will enable generic drugmakers to produce much cheaper versions. “So then we will have less of a price discussion and people who tolerate the drugs well can stay on them. And this will have a big impact on our society.”

Obesity drugs could become a lifestyle choice, he and others say – for example, if someone wants to lose 10kg for a family wedding they could use a GLP-1 drug temporarily to suppress their appetite. But a lot rides on whether the drugs will be available as pills one day.

Paul Major, director at another big investor, Bellevue Asset Management, is sceptical. “This idea that you can’t be a shareholder in Dunkin’ Donuts, Starbucks or Diageo is a bit fanciful. Nobody knows how long anyone’s gonna stay on these drugs. What the data shows is if you come off these drugs cold turkey, your appetite will come roaring back … The vast majority of people are not going to take these drugs.”

On the ground

In Luton, most of those visiting the takeaways forlunch agree that they are not likely to follow in the footsteps of celebrities such as Sharon Osbourne, Amy Schumer and Oprah Winfrey and give the jabs a try.

Bev Lewis, 55, says: “I wouldn’t go there. You wouldn’t know what’s in it. I would rather use honey and lemon or something natural.” Lewis says she is more likely to “boil up herbs” from her Caribbean family homeland and eat home-cooked food. “Everyone in my household is on the same wavelength.”

Nkechi, 40, who eats takeaways once or twice a month, agrees. “I don’t believe in that way of doing things and they will have some side effects. I eat fast food as a treat, I try to balance things. It is sometimes difficult as I see ice-cream and I think ‘let me just try’ and healthy food is expensive. But with the drugs you would have to pay for it.”

Waiting at a noodle takeaway van, Qabilah, 24, says she and a number of her friends have tried drinking lemons boiled in water as a weight-control trick. While she has not heard of the new weight loss jabs she would “probably give them a go” if she felt she needed it – but she remains not entirely convinced.

Matthew Hudson, a public health spokesperson from Luton borough council, says the drugs are “not a silver bullet” and probably should be reserved for those at the most extreme end of treatment to control their weight – surgery.

“They are one of the things that can support and potentially help people but we are more focused on prevention and see that as more sustainable and feasible way of supporting the community,” he says.