Beyond Food: GLP-1 Drugs Disrupt Everything From Casino Apps, to Retail, and Airlines

With his villa on the island of Mauritius, a collection of more than 200 classic cars, and a penchant for skewering companies that fail to deliver the results he expects, British investor Terry Smith is no stranger to making the news. But in January, Smith—often called “the British Warren Buffett”—turned a few more heads than usual when he announced that his company Fundsmith was dumping all its stock in Diageo, maker of Smirnoff vodka and Johnnie Walker Scotch. “We suspect the entire drinks sector is in the early stages of being impacted negatively by weight-loss drugs,” he told investors. The billionaire stock picker was talking about medications like Ozempic and Wegovy, glucagon-like peptide-1 receptor agonists, GLP-1s for short. Initially developed to treat type-2 diabetes, the drugs have more recently demonstrated a capacity to neutralize patients’ cravings, leading to significant weight loss. Smith's announcement obviously wasn't good news for Diageo, though a company spokesperson told ADWEEK that the drugs have not had "any material impact on our business." But it may have been a portent of the disruption in store for scores of companies, not only those in the booze business. According to futurist Doug Stephens, founder of consultancy Retail Prophet, GLP-1’s ripple effects—some bad, some good—are heading for almost every category. “You could almost look at the entire consumer market and say that anything that requires restraint, discipline, or willpower is in danger,” Stephens said. As more Americans go on the drug, the result “could be nothing short of a tectonic shift in consumer behavior across huge segments of the economy.” Early signs of trouble Tremors have already shaken the ground below brands in the grocery and packaged-food sectors, where GLP-1s have eroded $6.5 billion in sales to date, according to a new report from Big Chalk Analytics. A Cornell University study charted that GLP-1 patients cut spending by 6% on groceries, 9% on fast food, and 11% on snacks. Little wonder that analysts have begun pressing CEOs on the issue. During Walmart’s 3Q earnings call, for example, CEO Douglas McMillon said, “We’re feeling some margin pressure from growth in GLP-1 drugs.” McDonald’s and Krispy Kreme have seen their shares downgraded. And last November, Hershey CEO Michelle Buck acknowledged a “mild year-on-year impact” on sales. (McDonald’s declined comment, and the others did not respond to ADWEEK’s requests.) These difficulties have been well reported. Less discussed is the possibility that brands outside the food and beverage sector will face revenue drops, too. “These drugs inhibit impulsive and compulsive behaviors… how [will] that change things when it’s multiplied by the sheer number of people who are going to be on them,” said business futurist Scott Steinberg. If impulse buying falls, he said, “things like in-app transactions, downloadable content, and casino apps may go down as well.” Unlike diet pills of the past that helped people go down a size if they were lucky, GLP-1s can mean serious weight loss, in some cases, more than 25% of their starting body weight, according to one Blue Cross study. Body changes like that will present considerable challenges for apparel companies, Stephens argues. Mall chains that have built their offerings around big, boxy American frames may need to rework their lines. Demand for shapewear may also decline. And what about the $88 billion Americans spend annually on gym memberships? “I don’t think people will enjoy the effort and strain [of the gym] if they can take a pill and lose 25 pounds,” he said. “So if I were the fitness industry, I’d be concerned.” Lost pounds, gained market share For all its disruption, new technologies tend to usher in new opportunities, too. Alix Partners analyst Bernardo Silva argued that the drugs are “not only a threat, but certain categories will benefit.” Since GLP-1s get in the way of vitamin absorption, brands that make “nutrient-dense options,” as the Cornell study put it, are arguably in a pole position. Conagra recently added a “GLP-1 Friendly” label to its Healthy Choice packaging to remind shoppers that its frozen entrees are high in protein and fiber. When Danone North America noticed an upsurge of GLP-1 discussions on social media during the Super Bowl in February, it created The Danone Nutrition Group Chat on Instagram, featuring registered dieticians talking about how to incorporate its Oikos brand yogurts into a fortified diet. And Nestlé Health Science put up a microsite called GLP1-Nutrition.com last summer. “The number of people on GLP-1 weight loss therapies is growing,” CEO Anna Mohl said in a statement. "We have brands and expertise across our portfolio to support [their] needs.” The fortunate few Looking further out, some boats may be lifted by the GLP-1 tide simply by the categories they’re already in—travel, for one. A recent report from Jefferies Financial calculated that if GLP-1-taking passengers lost just 10 pounds each, the average United Airlines flight would be 1,790 pounds lighter and save the carrier $80 million a year. “Measuring the amount of fuel needed to fly Americans around, [such] savings are meaningful,” said Rachel Maguire, research director for The Institute for the Future. (United did not respond to a request for comment.) Fashion rental platforms like Nuuly and Rent the Runway also seem well-positioned. Patients enjoying a GLP-1 self-esteem boost will probably want to find some nicer clothes, and, reasoned The Brand Consultancy’s chief growth officer, Meghan Labot, these sites “offer the flexibility to adjust your wardrobe as your body changes.” Rent the Runway founder and CEO Jennifer Hyman told ADWEEK that her customers appreciate "being able to rent clothes during times when their size is fluctuating, including women who've lost weight rapidly after starting on GLP-1s." She added: "These women are also more likely to experiment with new brands and new styles." Of course, the most immediate beneficiaries of the trend are the companies that are conduits to the drugs themselves. Since GLP-1s require a doctor’s prescription, telehealth services are an increasingly popular destination online. Remedy Meds—which did not respond to a request for comment—boasts on its site that it’s already written 150,000 GLP-1 prescriptions. Many patients don’t want to bring up weight loss with a family doctor for the same reason that “a guy doesn’t want to go to their doctor and talk about erectile dysfunction,” Ahmed Elsayyad, president and cofounder of healthcare software maker Ostro, said. “They’d rather just do a couple of questions and get [the medications] to their door.” Not that easy access to prescriptions means everyone and his uncle will soon be taking the drugs. They are expensive and have what a recent Northwestern University study termed a “high discontinuation rate.” Between 50% and 70% of GLP-1 users stop taking them within a year. Meanwhile, it’s worth pointing out that Diageo’s organic net sales have risen 5.9% since British investor Smith sold off his company stock in January. But speaking on the Interactive Investor podcast, Smith stuck to his guns. “Ozempic and Wegovy are only labelled in eight countries at the moment,” he said, “so when this really does become widely available, it could have a very interesting effect.”

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Beyond Food: GLP-1 Drugs Disrupt Everything From Casino Apps, to Retail, and Airlines

Slimmer people mean big changes beyond the usual categories of food and drink

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