In October 2023, Walmart released a quarterly update that sent ripples throughout the food industry – consumer spending on food was experiencing a decline, attributed to the growing popularity of GLP-1, most notably Ozempic. This information catapulted headlines, sparking discussions and evaluations on the future trajectory of the food industry. The implications have since prompted both companies and consumers to reassess their strategies and preferences in response to the buzz surrounding GLP-1. In this piece, we dive into those implications and examine the impact of GLP-1 on the food industry.

Impact of GLP-1 on the Food Industry

Regardless of how the impacts of Ozempic are materializing, the food industry landscape is shifting. Businesses and consumers are being forced to grapple with the newfound realities brought about by the medication and what it represents in the industry. There is lots of promise and potential, but it remains imperative to consider the financial conditions both from a business profitability standpoint and from the consumer side. Below, we shed light on the unfolding dynamics resulting from Ozempic’s impacts, offering insights into how the food industry is adapting to its ever-changing landscape.

Business Outlook

As previously mentioned, Ozempic and other medications of the like are presenting businesses with a critical juncture. The post-pandemic era was marked by a surge in demand, seen especially in North America’s largest food producers. As the impacts of the pandemic have waned and inflation has caused many households’ wallets to tighten, many industry giants have experienced considerable drops in demand over the past year.

Notable companies such as Kraft Heinz and Campbell’s have reported sales declines over the past six quarters. Several factors have contributed to this shift, but as it relates to the growing popularity of GLP-1 medications, there is a broader health-focused trend at the center of these changes. Consumers are increasingly prioritizing health, and this aligns directly with the heightened interest in Ozempic.

Seeking to address these challenges, businesses are strategically turning to mergers and acquisitions (M&A) to align with evolving consumer preferences. The food industry is witnessing a notable trend of M&A activity, with companies diversifying into spaces influenced by the Ozempic craze and growing wellness focus. Notably, Mars, a confectionary food brand, purchased Kevin’s Natural Foods for $800 million in early July. This reflects the movement of major brands into the health foods space, as traditionally “unhealthy” brands are making strategic moves to meet the elevated needs of consumers.

In addition to this, the snacking and snack foods sector has performed surprisingly well. On one hand, an increase in snack food consumption paired with a higher health emphasis seems contradictory. However, consumers have turned to snack foods as meal replacements to align with the health-focused buzz surrounding Ozempic, which emphasizes portion control and higher protein intake. As such, snacks are likely to help consumers adhere to these dietary guidelines.

To gain insight into the business perspective heading into the new year, the CEO of Mondelez spoke on CNBC ealier this year to address their strategy and perspectives. The interview encapsulates a level of cautiousness in decision-making, avoiding choices that may not be profitable while reflecting an exploration of new avenues as the benefits of post-pandemic and price-hike profits begin to fade. In essence, the food industry is in a state of flux, seeking new ways to grow and understanding and monitoring the impacts of Ozempic and everything it represents. Businesses are treading carefully, balancing the need for profitability with the imperative to adapt to the changing landscape influenced by health-conscious consumer trends and the rise of GLP-1 medications.

Consumer Preferences

The significance of GLP-1 medications, particularly in the context of health-consciousness and weight loss, has left an indelible mark on consumer preferences, shaping the trajectory of food spending and consumption choices. Notably, households with GLP-1 weight loss users have been observed to decrease food spending at a rate six times faster than non-GLP-1 households, underscoring the tangible influence of these medications on consumer behavior.

While the initial craze surrounding Ozempic may have simmered, it triggered almost immediate reactions in the market. A notable trend that arose was the adaptation of existing products as “add-on” or companion options for individuals on GLP-1, focusing on promoting gut health and mitigating potential side effects. There are many other subtle shifts similar to this going on in the food industry, with products changing how they’re being marketed or new products hitting shelves altogether. All these products emphasize portion control, nutrient-rich content, and a high-protein profile. These strategic moves seek to align with the evolving needs of consumers incorporating GLP-1 medications into their lifestyle and daily choices.

Drawing overarching conclusions from the consumer perspective, established companies within the food industry appear largely unbothered by the effects of the GLP-1 medication buzz. Many companies have had strategic plans in place to make health-conscious moves as consumers had already signaled their shifts to healthier lifestyle choices. However, the rise of GLP-1 has provided opportunities for certain health-focused companies to enter the market through niche avenues and see rapid growth. Ultimately, the ongoing evolution of the consumer landscape reflects a delicate balance between established norms and preferences and the emerging trends associated with GLP-1 medications.

Looking Ahead

In the wake of the rising popularity of GLP-1 medications, especially Ozempic, the food industry is witnessing a pronounced shift in consumer preferences and business strategies. High-protein and health-conscious product launches and brand deals are on the forefront, aligning with the dietary preferences associated with Ozempic usage. The correlation between the GLP-1 trend and the surge in health-focused products is apparent. However, distinguishing whether these changes result from an overall consumer trend or are directly linked to GLP-1 medication remains ambiguous.

While there are deliberate and noticeable shifts in consumption habits and preferences, the impact of Ozempic seems less focused on reducing overall consumption baskets or altering shopping habits than one might assume. Instead, there is a clear emphasis on the types of products being offered and the way they are being marketed to cater to the health-conscious demographic. Ultimately, the impacts of GLP-1 on the food industry will continue to be realized as the year goes on.

At Clarkston, we have experts in the food industry who can assist your company in navigating these changes, creating a dynamic strategy that fits with your firm’s ambitions and the market’s challenges. To learn more about the state of the food industry or about how we can help, reach out to our team today.

Contributions from Aaron Messer