Nestle SA is working on products designed to complement a new class of weight-loss drugs after revenue growth decelerated to the weakest pace in almost three years.
(Bloomberg) — Nestle SA is working on products designed to complement a new class of weight-loss drugs after revenue growth decelerated to the weakest pace in almost three years.
A recent share decline in European food stocks has been partly blamed on the meteoric boom in GLP-1 diabetes treatments, namely Ozempic and Wegovy, which curb users appetites and help them to lose significant amounts of weight. Soaring demand for these drugs have made their Danish owner Novo Nordisk A/S the most valuable company in Europe.
Nestle Chief Executive Officer Mark Schneider said the bulk of the company’s portfolio won’t be affected as Wegovy users will continue to drink bottled water as well as buy food for their pets. Even if demand for chocolate and frozen pizzas falls, Nestle is already working on a wide number of products that could serve as health aids during weight-loss treatments.
“When you eat less, you have certain needs of vitamins, minerals and supplements,” he said. “You want to be sure that the weight loss gets supported. You want to be sure that you limit the loss of lean muscle mass.”
Nestle shares fell as much as 2.6% Thursday after sales growth missed expectations as consumers balked at higher prices from the maker of Purina petfood and Nespresso coffee.
The stock has dropped more than 5% in the past month, partly on concern people taking medications like Wegovy might consume less food. Some Wegovy users have mentioned in online chatrooms how coffee tastes differently or can make them nauseous — a further threat to Nestle, which has said coffee shouldn’t be affected. Schneider said the new drugs haven’t yet affected consumption.
That’s in contrast to Walmart Inc., which is already seeing an impact on food-shopping demand from people taking the diabetes drug Ozempic, Wegovy and other appetite-suppressing medications.
Read More: Ozempic Is Making People Buy Less Food in US, Walmart Says
Schneider said Nestle’s work on “companion products” can also help ensure that weight isn’t regained. The company’s US market share for frozen food has grown as Lean Cuisine meals attract dieters. The company is working on smaller portion sizes, and already sells products such as Optifast meal replacements for weight loss.
Complementary products for dieters could provide a much-needed boost to Nestle’s health science business. It has been one of the worst-performing divisions for Nestle so far this year and the company delayed its 2025 sales and profitability goals by six months. Revenue from vitamins, minerals and supplements fell during the period following an IT snarl in the US.
Schneider said any future hit on consumption would be outweighed by such new opportunities. Broader adoption of weight-loss drugs could cut food and beverage volumes by 1% to 2%, according to Citigroup analyst Anthony Pettinari.
Confectionery, dairy products, prepared dishes and cooking aids represent around a third of Nestle’s sales. Shareholder groups this month criticized Nestle for not being ambitious enough in making its portfolio healthier. The company last month announced that Nestle Health Science CEO Greg Behar will leave the company and is being replaced internally.
The decline in Nestle’s volumes in the third quarter is a key negative, wrote Molly Wylenzek, an analyst at Jefferies.
Nestle’s quarterly sales growth was the slowest since late 2020. The company reiterated its forecast for a 7% to 8% increase in revenue this year. Schneider said in July growth should be at the upper end of that range. Capacity constraints weighed on sales of Perrier bottled water, and the US market was challenging.
Read More: Ozempic Threatens Profits at Food and Beverage Makers Worldwide
–With assistance from Allegra Catelli.
(Updates with change of Nestle Health Science CEO)
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