Coca-Cola and PepsiCo's stocks fall after Walmart says weight-loss drugs have customers cutting back on calories

By Ciara Linnane

Analysts have warned that food and beverage companies would need to consider the impact of Wegovy and Ozempic on consumer behavior

Shares of Coca-Cola Co. and PepsiCo Inc. were slammed on Thursday, after Walmart Inc.'s U.S. chief executive said the new class of weight-loss drugs like Ozempic and Wegovy were causing customers to buy fewer groceries and cut back on those that are high in calories.

Walmart's (WMT) John Furner told Bloomberg in an interview that the company can track which of its customers are taking the drugs and see they are causing a "slight pullback in overall basket" and "less units, slightly less calories."

The comments sent Coca-Cola's shares (KO) down 4.8% and PepsiCo's shares (PEP) down 5.2%. Coca-Cola was up 0.4% on Friday, while PepsiCo fell another 0.8%.

Analysts have already expressed concerns that the growing popularity and use of anti-obesity medications would have far-reaching implications for the food and beverage industry and that companies may have to adapt their product choices to address changing consumer behavior.

In August, Morgan Stanley analysts wrote that packaged-food and beverage makers, restaurants, grocery stores and weight-loss programs would all be affected as the pool of patients is expected to grow to 24 million people, or nearly 7% of the overall U.S. population in the next decade.

Some 45% of the U.S. population is currently deemed to be obese and 70% to be overweight.

Read now: As Ozempic/Wegovy frenzy continues, Morgan Stanley lifts forecasts for weight-loss drugs to $77 billion

"Given the drugs' direct impact on reducing appetite and calorie intake, AOM uptake could drive a broad and lasting behavioral shift among a sizable demographic group that represents a disproportionate share of food consumption," a team of 17 analysts wrote in a report.

The new class of medicines includes Novo Nordisk's (DK:NOVO.B) (NVO) Wegovy and Ozempic and Eli Lilly's (LLY) Mounjaro. They've become so popular in the U.S. that supplies have at times run short and the U.S. Food and Drug Administration has been forced to warn patients against using knockoff versions.

For more, read: The dark side of the weight-loss-drug craze: eating disorders, medication shortages, dangerous knockoffs

The drugs are administered by injection weekly and mimic the effects of GLP-1, a gut hormone that can help control blood sugar levels and reduce appetite. GLP stands for glucagon-like peptide.

Walmart has also said that its pharmacy business was benefiting from demand for Ozempic and Wegovy.

Bonds issued by Coca-Cola and PepsiCo, meanwhile, saw better buying on the day on Thursday with sellers emerging later, as the following charts from data solutions company BondCliQ Media Services illustrate.

PepsiCo has $39.9 billion in bonds outstanding, while Coca-Cola has $36.8 billion.

Coca-Cola's stock has fallen 18% in the year to date, while PepsiCo's has fallen 11%. The S&P 500 SPX has gained 11%.

-Ciara Linnane

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10-09-23 0708ET

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