OZEMPIC THREAT IS CAUSING A SELLOFF IN CANDY AND BEER STOCKS
The bad news keeps piling up for the makers of everything from soft drinks to chocolate and booze.
The latest blow took the form of comments from Walmart, which said this week it’s already seeing an impact on shopping demand from people taking Ozempic, Wegovy and other appetitesuppressing medications. That’s sent shares of food and beverage companies sliding.
Oreo maker Mondelez was among the worst performers in the S&P 500 Consumer Staples Index on Friday, extending Thursday’s plunge to hit the lowest level since November 2022. Kellanova, the company behind Cheez-It and Pringles, PepsiCo and Modelo maker Constellation Brands all slumped. The consumer staples gauge fell as much as 2.7 percent on Friday, and it’s on pace for its worst week since September 2022, with retailers Walmart, Costco and Kroger also tumbling.
“When Walmart mentioned it,
I think the concept of weight-loss drugs having a broader effect on a wide range of companies really took hold in investors’ minds,” said Steve Sosnick, chief strategist at Interactive Brokers.
To be sure, consumer stocks have been falling for some time,
especially as inflation squeezes household incomes. The industry also tends to pay hefty dividends that look less appealing for investors compared with 5 percent interest at money market funds. The S&P 500 Consumer Staples Index has significantly underperformed the broader market in 2023, and it’s trading at the lowest level in a year.
Given the rapid popularity of this new class of weight-loss drugs and an early warning from one of the biggest retailers, it’s been enough to spark another round of selling. A recent survey conducted by Morgan Stanley found that patients tended to cut back on meals and snacks while taking weight-loss drugs, and also consumed less alcohol and carbonated drinks.
Still, there’s some skepticism about whether the medications will actually cause major changes in consumer buying habits. Investors like Richard Saldanha, global equity fund manager at Aviva Investors, caution against reading too much into the stockmarket swings.
“Whilst we know that these drugs do tend to result in suppressed appetite, we think the moves in the share prices do feel somewhat overdone,” he said. “It is far too early to make sweeping conclusions on what this might mean for consumer habits.”