Some investors remain hungry these days. Stocks of companies in the fast food sector have been losing momentum since January. A trend that coincides with the emergence of new drugs that literally suppress the appetite of the continent’s biggest junk food eaters.
According to the British bank Barclays, it is not just the large fast food chains that are threatened by these drugs, the best known of which is probably Ozempic. Tobacco companies, soda producers (Coca-Cola, Pepsi, etc.), potato chip sellers: all are likely to see their customers melt away, downright, now that the latter has at its disposal medications with virtues that sometimes seem miraculous. .
To draw this conclusion, Barclays created a stock index composed solely of fast food-related companies. This index has seen its value fall by 14% since the start of the year, which coincides with the emergence of Ozempic. And that’s not all. In a report published at the beginning of October, Barclays calculated that 7% of the American population – or 24 million consumers – could be subscribed to drugs of this type within 10 years.
Ozempic was designed and approved by health authorities in the United States and Canada to treat type 2 diabetes, but it is increasingly used to treat obesity. Its users consume on average 20% fewer calories per day.
Financial analysts speculating about its impact on the food sector say the drop in consumption could have a concentrated effect on cheap or fast-food brands, where high-calorie foods are more common.
Especially since Ozempic is not the only drug in the running to have an accelerated weight-loss effect. Produced by pharmaceutical giant Novo Nordisk, the drug is what experts call a GLP-1 analogue (glucagon-like peptide-1). Rival pharmaceutical companies also have GLP-1 analogue projects in their pipeline. Retatrutide, another drug of this type, developed by the company Eli Lilly, would have the same slimming properties, in a more pronounced manner.
“The impact of [analogues du] GLP-1 potentially risks causing turbulence in a number of industries,” Barclays strategists concluded in their report. Their recommendation to investors: it may be a good time to short sell shares of companies like McDonald’s or Kellogg’s, which risk paying the price for this widespread slimming treatment.
A “negative craze”
According to this logic, even large discount retailers like Walmart — or Alimentation Couche-Tard and even Dollarama, here — would go there.
In the wake of the publication of this report by Barclays, the CEO of Walmart, John Furner, admitted to the American financial press that the company saw “resolutely people refraining from buying certain foods”. At Walmart, we still observed an increase in sales of other products – particularly in the pharmacy aisles, in fact.
Barclays also does not fail to emphasize the potential gain in value that this movement could cause in this area.
Back home, some believed at the beginning of the fall that the Montreal food franchisor MTY could be another victim of Ozempic. The group’s stock has lost 20% of its value since a peak reached in August.
Not so fast, nuance Aaron Lanni, portfolio manager and partner at the GPS Medici firm, in Saint-Bruno-de-Montarville. Mr. Lanni knows the MTY group well, given that his firm holds its stock in its portfolio. “There are some US headlines that have fallen due to the sudden popularity of Ozempic, but in the case of MTY the decline seems more to do with rising interest rates,” he says. “MTY has to manage high debt and is focused on paying it down rather than making acquisitions. That affects his title. »
There are US headlines that have dropped due to Ozempic’s sudden popularity
In fact, even in the longer term, Aaron Lanni doesn’t see the emergence of drugs like Ozempic having a lasting effect on fast food stocks. “There are significant side effects, such as nausea and vomiting,” notes the Montarville manager. “It’s a needle injection, which doesn’t make everyone comfortable, and it costs up to $1,000 a month for the uninsured. This risks slowing down its use. »
In the longer term, we could discover more serious side effects to GLP-1 analogues, Mr. Lanni also notes. He continues: “Restaurateurs have the ability to adapt to this change, by reducing portion sizes or changing their menu to be healthier. »
The Ozempic effect on fast food may just be a form of “negative hype,” the portfolio manager concludes. A fear which perhaps hides another more serious one, according to him: the omnipresence of fast delivery companies like Uber Eats and Doordash. “They probably have a greater impact on the restaurant industry than a drug like Ozempic, since they become essential, whereas for Ozempic, the industry will probably adapt. »