Nestle SA is working on products designed to complement a new class of weight-loss drugs after revenue growth weakened to the slowest 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 weakened to the slowest pace in almost three years.
Recent declines in 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 that he’s surprised by the market reaction and that the bulk of the company’s portfolio won’t be affected as Wegovy users will continue to drink bottled water, buy pet food and infant formula. Even if demand for chocolate, ice cream and frozen pizzas ebbs, 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 3.6% Thursday after revenue missed expectations and Schneider revoked his previous forecast for full-year growth.
The stock has dropped more than 6% over the past month, partly on concern people taking medications like Wegovy might consume less food. Some users have mentioned in online chatrooms how coffee tastes differently or can make them nauseous — a further threat to the maker of Nespresso and Nescafe. Schneider said the new drugs haven’t yet affected food consumption in general, and he is less worried about coffee because it’s less caloric and consumers depend on it for caffeine.
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. Schneider said the market may be overreacting to such comments, given that it’s unknown how long most users will remain on GLP-1s.
Read More: Ozempic Is Making People Buy Less Food in US, Walmart Says
Schneider said Nestle’s work on “companion products” can also help consumers avoid regaining weight, especially because GLP-1’s aren’t a “permanent” solution. The company is also working on smaller portion sizes, and already sells products such as Optifast meal replacements for weight loss.
Nestle has acquired the rights to distribute Epitomee, a capsule being developed to promote weight loss. Results from a clinical study are expected by year end. Last year, Nestle bought PronoKal, a Spanish weight-loss program.
Complementary products for dieters could provide a much-needed boost to Nestle’s health science business. Revenue from vitamins, minerals and supplements fell in the third quarter due to supply chain issues caused by an IT snarl in the US. Health Science has been one of the worst-performing divisions for Nestle this year and the company delayed its 2025 sales and profitability goals for the unit by six months.
Broader adoption of weight-loss drugs could cut food and beverage volumes by 1% to 2%, according to Citigroup analyst Anthony Pettinari. Schneider said any future hit on consumption from GLP-1s should be outweighed by new opportunities.
Confectionery, dairy, convenience meals 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 quarterly sales growth was the slowest since late 2020. While the company reiterated its forecast for a 7% to 8% increase in revenue this year, Schneider took back a comment from July that he expected growth at the upper end of that range, due to the issues at Nestle Health Science.
RBC analysts James Edwardes Jones and Emma Letheren described the results as “soggy.”
Read More: Ozempic Threatens Profits at Food and Beverage Makers Worldwide
–With assistance from Allegra Catelli.
(Updates with CEO comments throughout)
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