Snack and beverage giant PepsiCo remains vigilant as the popularity of weight loss drugs grows, although the impact on its business has been minimal thus far.
Despite the rising popularity of weight loss drugs like semaglutide, PepsiCo CEO Ramon Laguarta assured analysts during a recent call that the company has not experienced any significant impact on its business. However, with the potential for these drugs to alter consumer consumption habits, PepsiCo is closely monitoring their growth and preparing for any potential changes in the market. As the adoption of weight loss drugs continues to increase, food companies are being urged to adapt their portfolios to offer healthier options and smaller sizes. PepsiCo, along with other major food manufacturers, has already begun this process, which could help mitigate any potential impact from the drugs.
The Rise of Semaglutide Drugs and Their Potential Impact
Semaglutide drugs, such as Ozempic and Wegovy, have seen a 40-fold increase in prescriptions in the past five years, with approximately 1.7% of the American population being prescribed these drugs in 2023. While their popularity has boosted the economy in Denmark, where Novo Nordisk, the maker of Wegovy and Ozempic, is based, it has also strained supply in the United States. Some food analysts warn that the long-term adoption of these drugs, which suppress appetites, could significantly change people’s health and eating habits.
PepsiCo’s Portfolio Strategy and Preparation for Potential Impact
PepsiCo CEO Ramon Laguarta emphasized that the company’s portfolio strategy is well-positioned to handle potential impacts from weight loss drugs. The company has been actively reworking its portfolio to offer healthier options, reduce fat, sugar, and salt in snacks and beverages, and sell products in smaller packages. These changes align with the evolving preferences of consumers, who are increasingly opting for smaller packages and healthier choices. Laguarta also noted that there are still uncertainties regarding the long-term effectiveness and popularity of weight loss drugs.
Positive Impacts and Adaptation to Changing Tastes
PepsiCo CFO Hugh Johnston expressed optimism about the potential positive impacts of weight loss drugs on the company. He believes that anything that promotes human health will ultimately benefit PepsiCo in the long run. Johnston emphasized that people will continue to snack in some form or another, and if necessary, PepsiCo will adapt its product offerings to cater to changing tastes and preferences. The company has already seen success with reduced sizes, which appeal to customers seeking portion control or more affordable options.
Sales Performance and Price Hikes
PepsiCo’s sales of smaller packages have helped offset declines in volume, according to Laguarta. The company has also implemented price hikes globally, averaging an 11% increase, which contributed to higher-than-expected revenue in the third quarter. Despite a 2.5% decrease in volume, net sales rose nearly 7% to $23.45 billion. As a result, PepsiCo raised its full-year earnings per share forecast, marking the third consecutive quarter of upward revisions. The company now expects earnings per share to be $7.54, up from the initial forecast of $7.20 per share.
Inflation and Market Performance
Like other food companies, PepsiCo has increased prices to counter inflationary pressures. However, there has been some improvement for US consumers, with grocery price increases slowing down in August, rising just 0.2% for the month. The September Consumer Price Index will provide further insight into inflation trends. In North America, PepsiCo reported sales growth for Gatorade, Bubly sparkling water, and sodas. The company also announced plans to relaunch the Baja Blast, a popular soda created in collaboration with Taco Bell, in three different varieties, including a zero-sugar version. Additionally, consumers can expect to see the new Pepsi logo, unveiled in March, appearing on PepsiCo products soon.
While weight loss drugs like semaglutide continue to gain popularity, their impact on PepsiCo’s business remains negligible. The company’s proactive portfolio strategy, which focuses on healthier options and smaller packages, positions it well to adapt to potential changes in consumer preferences. PepsiCo’s ability to raise prices and maintain sales growth despite volume declines demonstrates its resilience in the face of inflationary pressures. As the market continues to evolve, PepsiCo remains committed to meeting consumer demands and ensuring its products align with changing tastes and health-conscious choices.