Bloomberg’s Market Live Team keeps its finger on the pulse of financial markets with a weekly survey of investors. This week, 303 respondents were asked about the impact of weight-reducing drugs such as Ozempic on the junk food industry. Nearly three in four said companies that produce or market sugar, fat or ultra-processed foods should rethink their plans, either by reducing portions or changing their recipes, or by divesting assets altogether. Just over a quarter of the 303 respondents think big food can ‘wait out’ the emerging threat of appetite-suppressing drugs such as Ozempic, Wegovy or Zepbound.
“The challenge in the developed world is less about increasing calorie consumption and more about moving towards healthier diets,” said Mayssa Al Midani, chief manager of Pictet Asset Management nutrition fund.
Some investors have long been reluctant to include unhealthy foods in their portfolios. But it was mainly limited to asset managers with a focus on environmental, social and governance issues. It never led to the kind of calls for widespread divestment comparable to those against the fossil fuel, gambling or weapons industries. But that is changing, largely due to the new class of drugs being prescribed for diabetes and obesity.
“To view unhealthy food as the ‘new coal’ is quite powerful,” said Kate Hewitt, an ESG and impact specialist at Montanaro Asset Management. “There are some important differences, but just as the shift away from coal is driven by the urgent need to tackle climate change, in the fight against obesity and its associated non-communicable diseases and health costs it is essential to move away from unhealthy diets to exercise.”
Anxious CEOs
The treatments, which according to Bloomberg Intelligence would account for a market worth $80 billion by 2030, ensure that users feel satiated more quickly. There is already an effect on food. Walmart Inc., the United States’ largest food retailer, said in October that the massive increase in consumption of the drugs was reducing shoppers’ total calories. Earlier this month, the CEO of Novo Nordisk, the maker of Ozempic, said he was receiving calls from “anxious” food industry CEOs wanting details about the new drugs.
Nearly one in four respondents said they had already made changes to their investment decisions because of the popular drugs, while only 15 percent said news of new obesity treatments would not change the markets. Of the large group of respondents who do foresee important developments, most expect that the next big breakthrough will be a pill or an easier option that helps people lose kilos without the disadvantages of a weekly injection. Novo has already developed an oral version, but it still requires large amounts of the active ingredient semaglutide. The producer still has to figure out how to best manage inventory.
If the drugs really take off, which will become clearer in five to 10 years, “there will definitely be a long-term impact on growth rates for alcohol, snacks, smoking, gambling and some healthcare companies,” concludes Gareth Powell, head of health at Polar Captial.
