Weight-loss pill approval set to accelerate food industry product overhauls

Packaged food makers and fast-food restaurants may be forced to overhaul more of their products next year as newly approved, appetite-suppressing Novo Nordisk’s Wegovy GLP-1 pills become available in January, analysts say.

More Americans are expected to try the drugs as a pill rather than as a shot because the medication will be cheaper and many patients are hesitant to inject themselves.

The U.S. Food and Drug Administration approved Novo Nordisk’s Wegovy GLP-1 pill on Monday, sending shares of food companies down on Tuesday. Eli Lilly’s rival medication is expected to gain approval from regulators next year.

Food companies including Conagra Brands and Nestle are already dealing with shifts in consumer tastes toward higher protein and smaller portions due to the popularity of weight-loss injections, and analysts believe widespread GLP-1 adoption could mean long-term changes in demand.

To cope, businesses are promoting products with more protein, tweaking labeling to say they are GLP-1 friendly and working with large retailers to better market products.

“We are seeing people cut (back) specifically on salty snacks, liquor, soda, drinks, and bakery snacks, and more focused on protein and fiber, so we expect food companies and also restaurants to cater to this audience that is growing,” said JP Frossard, consumer foods analyst at Rabobank.

“We’ll see more access to those drugs and a higher addressable market for products that have in mind the needs of the GLP-1 user,” he said.

Andrew Rocco, stock strategist at Zacks Investment Research, called Novo’s approval “groundbreaking” because the pill would be cheaper than the injectable version of Wegovy and deliver the same weight-loss metrics. “High protein, smaller portions, and functional food innovation will be necessary,” he said.

FOOD COMPANIES ARE TAKING NOTE

Some 40% of American adults are obese, U.S. government data shows, and around 12% of adults say they currently take Novo Nordisk’s Wegovy GLP-1 drugs, according to a poll published last month by health policy research organization KFF.

Households using GLP-1 medications cut spending at grocery stores by 5.3% and fast-food restaurants by about 8% on average, according to a Cornell Research study published last week that used purchase data collected by Numerator from about 150,000 households.

Those reductions largely faded when households stopped using the medication.

“The decreases we saw will likely show up in a much broader slice of the population” because of weight-loss pills, said Sylvia Hristakeva, one of the study’s co-authors. She said the cheaper price and ease of use of pills will also make it likely that people use the medication for longer.

While the Cornell study found modest increases to spending only in a handful of categories like yogurt and fresh fruit, companies are taking note.

Earlier this year, Conagra started labeling some of its Healthy Choice frozen meals with high protein and fiber as “GLP-1 friendly.” A spokesperson said those meals are selling faster than rival products making similar claims on their packaging. The company plans to introduce new Healthy Choice recipes with the same labeling in May and work with grocers like Walmart (WMT.O), opens new tab and Kroger to market them, the spokesperson said.

French dairy company Danone, which makes Oikos Greek yogurt, said in a statement that it is seeing double-digit growth in its high-protein offerings, a trend that has accelerated with the adoption of GLP-1 medications.

Nestle, the world’s biggest food company, has also introduced new frozen meals that cater specifically to GLP-1 users, called Vital Pursuit. The Swiss company did not respond to a request for comment.

Fast-casual Mexican chain Chipotle on Tuesday added a “High Protein Menu” that features, among other items, a single cup of chicken or steak.

In recent months, some restaurant chains including Olive Garden have added menu items for smaller, cheaper portions.

Noodles & Company marketing head Stephen Kennedy said such menu additions were about offering guests “options that satisfy without going overboard.”