Business in the age of Ozempic: who will benefit from the growing popularity of weight loss drugs

Diabetes and obesity drugs based on semaglutide and tirzepatide - Ozempic, Wegowy, Zepbound and other hits from Danish Novo Nordisk and U.S.-based Eli lilly - are not only affecting the pharmaceutical market, but also other industries, including food production, restaurants and even clothing sales. In June, The Wall Street Journal reported on the sudden demand for clothes in small sizes, one of the reasons for which was the widespread availability of new weight-loss drugs;

How is the business adapting to the new realities?

Fashion retailers suddenly have a new opportunity to make money - thanks to the popularity of Ozempic and other diabetes and overweight medications. The reason is simple: people who have lost weight buy new clothes, writes WSJ. And it's not just about smaller clothes - some shoppers after weight loss choose frank models and tighter silhouettes. 

Lafayette 148 CEO Deirdre Quinn told the publication that about 5% of the brand's customers buy new clothes because of weight loss - often replacing a size 12 with a size 6 or 8. It's a double benefit, she says - the company also saves money on fabric, because less fabric is needed for smaller sizes;

According to plus-size shoppers and influencers, the assortment of plus-size clothing at many retailers, including H&M, has shrunk, writes Business Insider. The data backs that up. According to a report by analytics firm Edited for 2024, fashion retailer Aritzia has reduced the share of size 2XL dresses among new arrivals by 5 percentage points compared to 2023, while increasing its offering of smaller sizes. At ASOS, the assortment of large-size clothes decreased by 15% compared to last year. The authors of the report, however, note that there is no unequivocal evidence that the increase in demand for smaller sizes of clothing is directly related to taking weight loss medications;

Nevertheless, the "Ozempic" revolution has contributed to a major shift in the fashion world - while back in 2019 brands were promoting body positivity, a few years later they started to abandon the idea. The proliferation of Ozempic and other similar products has reinforced this trend, writes Business Insider. 

In 2021, Loft stopped selling plus-size clothing, citing "ongoing business issues"; in 2022, the Old Navy brand said it would remove some merchandise from its stores - plus-size clothing can now be bought mostly online. In June of this year, Torrid, a retailer that sells plus-size clothing, announced plans to close up to 180 stores, Business Insider points out. 

It is likely that now retailers have a chance to improve their business. Their sales, the WSJ writes, citing data from research firm Circana, fell 4% in the 12 months through April on an annualized basis. And a scenario in which people lose weight, buy new clothes, then possibly gain weight - and buy new clothes again - is very profitable for retailers.

It's true that makers of plus-size clothing are facing uncertainty. "I'm trying to figure out what we should be worried about in the future," said Doug Wood, head of the Tommy Bahama clothing chain, noting that more people are losing weight and sales of the Big & Tall collection for large men may drop.

Another example is WeightWatchers, a veteran of the U.S. weight loss market, which filed for bankruptcy in May.

This month, it announced plans to rebuild. The company said it has resumed trading its stock on Nasdaq (it has added nearly 30% since the end of June) and reorganized. It now plans to focus on women's health - offering a program for women in menopause. The company has assembled a new board of directors. Among others, it includes former Eli Lilly top manager Mike Mason, who oversaw the development of semaglutide and tirzepatide-based drugs, including Mounjaro. Novo Nordisk has struck a partnership with it, under which WeightWatchers will be able to offer Wegowy to customers.

The company is reinventing its business in the Ozempic era, writes the Financial Times. 

This is the second time recently that WeightWatchers has changed its strategy due to the growing popularity of weight loss products. First, they disrupted its business model based on its proprietary points-based weight loss system and calorie counting. Adapting, in October 2024, she began selling cheaper generics of semaglutide-based drugs by writing prescriptions online. At the time, it could do so because the US Food and Drug Administration FDA, citing shortages of Ozempic, Wegovy, Mounjaro and Zepbound, had authorized copies of them. But the new business scheme didn't work for long; in February of this year, the FDA announced that the shortage was over - and cheap copies were outlawed. After that, WeightWatchers went into bankruptcy. 

Restaurants and food manufacturers will have to adapt to the new reality. The fact is that those who take GLP-1-based drugs (semaglutide), according to a study conducted by the University of Oklahoma, consume 2-3 times fewer calories, about 720-990 kcal per day. As a result, consumers are buying less food, needing smaller portions packed with nutrients and protein to maintain muscle mass, which shrinks with rapid weight loss.

According to the latest Bloomberg Intelligence report from June of this year, consumers taking weight-loss medications are spending less on going out to restaurants and eating out, writes The Fortune. In a U.S. survey of 1,000 people taking GLP-1 medications, 54% of respondents said they became "significantly less likely" or "less likely" to eat out after starting the medication. About the same percentage of respondents reported a decrease in ordering takeout food.

Food manufacturers are also having to adapt. According to estimates by consulting firm Big Chalk Analytics, cited by the FT, the use of GLP-1-based drugs has already led to a 1.2-2.9% drop in US food sales. Consulting firm Roland and Berger wrote, citing research that households with at least one GLP-1 user spend about 6% less on groceries, while high-income households spend 9% less.

Nick Mody, consumer goods sector analyst at RBC Capital Markets, believes the main question being hotly debated in the industry right now is whether this is a temporary hardship or the beginning of a long-term change in consumer behavior. "The prevailing logic suggests this is more of a structural shift," he said.

The effects of the "ozempic" revolution are also accompanied by a worsening economic situation. Peter Galbo, consumer staples sector analyst at Bank of America, noted that consumers tend to either spend more on healthier snacks or switch to more affordable brands to save costs. He pointed to triple-digit growth in sales of Utz Brands' Boulder Canyon avocado oil chips, as well as PepsiCo's low-cost tortilla chip brand, which the analyst said was showing a "good growth rate", the FT wrote.

Morgan Stanley a year ago predicted a 4% decline in consumption of soft drinks, alcohol and salty snacks over the next decade. This forecast is based on an analysis of consumption of these products in the US, where up to 9% of the population will be taking GLP-1 drugs by 2035. 

It turns out that healthy food producers will benefit. In April, Morgan Stanley upgraded Danone's rating to "above market" from "equal-weight". In their filing, the bank's analysts pointed out that Danone's portfolio, approximately 90% of which is nutritionally sound, is well aligned with current consumer trends focused on gut health, high protein and GLP-1 intake. Morgan Stanley also notes Danone's reduced exposure to U.S. economic issues - the company only generates 21% of its revenue in the States, meaning it is less vulnerable to deteriorating consumer sentiment and the impact of duties. "Obviously GLP-1 is good news for us," Danone CEO Antoine de Saint-Affric said at a September 2024 investor conference in response to a question about the reasons for the company's strong yogurt sales in the U.S., wrote the WSJ.

In contrast, analysts at Morgan Stanley revised Nestle's rating down to "underweight" from equal-weight due to concerns about the company's valuation and growth prospects, writes Investing.com. 

At the same time, Nestle is actively trying to adapt to the new reality - last year, for example, released a new line of products Vital Pursuit, designed for consumers of weight-loss drugs based on GLP-1. They are enriched with protein, fiber and vitamins, and their portions are tailored to the appetite of the person taking the weight-loss medication, according to the company's website. Nestle is also developing its Health Science division, which focuses on nutritional supplements. According to Numerator, supplement use among GLP-1 users has risen 18% as many seek to get enough nutrients despite reduced food intake, stated the WSJ. Nestle has launched a separate website promoting protein shakes, fiber supplements and probiotics for gut health, and supplements for hair loss (one of the rare side effects of rapid weight loss). 

Another major food player, Conagra Brands, has added GLP-1 Friendly labeling to some of its frozen meals to appeal to people taking Ozempic or other similar medications, wrote the WSJ, citing company executives. 

This article was AI-translated and verified by a human editor