CPG Playbook   //   March 5, 2024

The Ozempic effect: CPG giants are reevaluating their portfolios in response to weight loss drugs

More people could be changing their eating habits soon due to the growing use of weight loss medication like Ozempic. As a result, several large CPG brands are reevaluating their portfolio in response to the changing needs of shoppers. 

KitKat-owner Nestle, for example, said it is developing products that complement these weight loss medications. Abbott Laboratories, which owns brands like Ensure, launched a new brand of protein shake in January, called Protality, which would help adults who are attempting to lose weight and maintain muscle mass. Meanwhile, General Mills already launched healthier alternatives to popular products like the new protein-packed Annie’s Macaroni & Cheese “Super Mac.” 

The skyrocketing demand for GLP-1 diabetes treatments that curb appetites and help lose weight, such as Ozempic, Mounjaro and Wegovy, could threaten sales for food and beverage companies. People on GLP-1 medication typically pair the drug with high-protein meals to maximize weight loss. To avoid losing out on sales, more CPG conglomerates have been releasing new products that specifically cater to people who are managing their weight.  

Barry Thomas, senior thought leader at Kantar, said that GLP-1 medication has been trending online. According to data from Kantar, there have been 300 million Google searches for GLP1 obesity drugs. On TikTok, there are nearly 82,000 videos under #Ozempic. At the moment, there is a shortage of GLP-1 medication, but Barry said he expects the number of users to grow even further once the out-of-stock issue has been resolved. In an interview with Yahoo Finance in January, Wegovy maker Novo Nordisk said the company is doubling the amount it is supplying in the U.S. market in order to meet demand.

“Looking at shoppers across North America, we’re seeing approximately 12% of consumers are either on these drugs or have been,” Thomas said. “Most consumers start their journey on this entire topic online to learn about the drugs and to secure the lowest pricing.” 

So far, CPG makers have been optimistic about their ability to adapt to customers’ needs. In addition to the new Annie’s Macaroni & Cheese “Super Mac,” which has 15 grams of protein compared to the nine grams of protein found in the regular version,General Mills also plans to introduce lower sodium and lower sugar products to its assortment of Betty Crocker cakes, cookies, and brownies. CEO Jeffrey Harmening said General Mills is developing new items “to meet evolving consumer weight management and nutrition needs.”

Sean Connolly, CEO of Slim Jim-maker Conagra, said during an earnings call in October that the company will adjust its assortment if customers want to eat less or gravitate towards a specific diet. Conagra also sees an opportunity to sell more frozen meals to people on weight loss medications.  

“If we end up seeing changes in consumer eating patterns, let’s say they go to smaller portions. Then, we evolve the innovations, and we design smaller portions,” Connolly told investors and analysts. “If they switch to different types of nutrients, we evolve the innovation, we switch to different types of nutrients. If they change the kind of pack sizes they snag on, we’ll change that.”

Meanwhile, Abbott’s strategy has been to specifically create a brand meant for people trying to lose weight. The company already has different types of protein shakes in its portfolio from its Ensure and Glucerna brands. But Protality’s nutrition shake is for customers who struggle to consume enough protein and nutrients to support muscle mass and function.

“We’re serving a new group of people who may be at a higher nutritional risk because they may be overweight or have obesity and use weight loss medications,” Hakim Bouzamondo, division vice president of nutrition research and development at Abbott, said in a press release. “Abbott intends to develop additional science-backed nutrition products and conduct clinical research to address the targeted nutrition needs of people losing weight.” 

While companies might be confident about their ability to release new products, they might not get the approval of people on weight loss medication. On forums like Reddit, people who use Ozempic have said that beverages and treats like coffee or chocolate tasted differently. This phenomenon could impact Nestle, whose big revenue drivers are sweets and coffee products like Nespresso. Nespresso alone generated 6.4 Swiss Franc or $7.2 billion in revenue in 2023. Meanwhile, Frozen food, confectionary and ice cream drive about 15% of Nestle sales.

Greg Carlucci, senior director analyst for consumer goods at Gartner, said that it is still too early to tell how significant weight loss medication will impact food brands. However, brands are compelled to start developing products now to gain first mover advantage. 

“What will challenge brands is being more reactive and proactive with product innovation to be able to match consumer demand,” said. “It will provide an opportunity for growth for first mover advantage for those companies and brands that are able to cater to that consumer.”