Caloric reset driven by GLP-1 drugs could cut food volumes by over 10%

Bank of America analysts project that increased adoption of GLP-1 weight-loss drugs like Ozempic and Wegovy will drive a "caloric reset," potentially reducing U.S. packaged food and beverage volumes by over 10% long-term. This shift, driven by reduced appetite and preference for salty, sweet, and high-fat foods, poses a structural risk to companies like Hershey, Mondelez, Smucker, Hostess-parent Flowers Foods, and Keurig Dr Pepper, while benefiting those with higher fiber or protein content, such as Conagra and General Mills, potentially requiring reformulation or acquisitions by exposed companies.

Analysis

Bank of America has identified a significant structural headwind for the U.S. packaged food and beverage sector stemming from the increasing adoption of GLP-1 weight-loss drugs. The bank's analysis projects a potential long-term volume decline of over 10% for the industry, driven by a "caloric reset" in consumers that suppresses appetite and reduces demand for salty, sweet, and high-fat products. While current GLP-1 usage is only 2-3% of U.S. adults, BofA forecasts adoption could reach high single digits within five years and a long-term potential near 35%, suggesting that initial volume losses of 1-2% annually could accelerate. The impact is not uniform across the sector; companies with portfolios concentrated in confectionery, bakery, and flavored beverages, such as Hershey (HSY), Mondelez (MDLZ), Flowers Foods (FLO), and Keurig Dr Pepper (KDP), are flagged as having the highest exposure. Conversely, firms with higher-protein and fiber offerings, like Conagra (CAG) and General Mills (GIS), are considered better positioned. The report underscores the strategic challenge for exposed companies, which may be forced to undertake costly product reformulations or more aggressive M&A to pivot their portfolios toward the nutrient-dense foods sought by GLP-1 users.

Key Decisions for Investors

• Investors should scrutinize holdings in packaged food companies with high exposure to confectionery, sugary snacks, and beverages, such as Hershey (HSY), Mondelez (MDLZ), and Keurig Dr Pepper (KDP), given the forecasted long-term structural volume risk.
• Consider reallocating capital towards or overweighting companies identified as better-positioned, like Conagra (CAG) and General Mills (GIS), whose portfolios align more closely with the emerging consumer preference for high-fiber and high-protein foods.
• Closely monitor GLP-1 drug adoption rates and company-specific strategies related to product reformulation and M&A, as the pace of adaptation will be a key determinant of future performance for at-risk food and beverage manufacturers.