For the past few weeks, much of Wall Street has been obsessed with Ozempic, and particularly on its potential impact on restaurants. Fears that a generation of Americans will suddenly lose their appetite for bacon double cheeseburgers hit industry stocks hard and suddenly had executives answering questions about a class of medication many hadn’t even heard of.
Sales data certainly seems to suggest it’s all a bunch of hot air. Industry sales are up 9.2% over the past year, according to data released on Tuesday. We can only presume that there are a lot more prescriptions for Ozempic and the similar drug Wegovy out there right now than at this time in 2022. And yet it doesn’t appear to be even slowing the restaurant sales train.
Yet that doesn’t mean that Ozempic and other drugs like it won’t have an impact on the industry over the long term.
“We know they will,” Gary Stibel, CEO of the New England Consulting Group, said in an interview. “We know they will, because we’ve been tracking this for a couple of decades.”
He said use of the drug will grow slowly, but significantly, over the next 20 years.
“The impact will be slow,” he said, “but over time it will be significant.”
Ozempic is part of a glass of drugs known as GLP-1. They’ve been in the market for nearly 20 years to treat diabetes, and in 2021 the U.S. Food and Drug Administration approved its use for weight loss. The drugs, which are injected, have been shown to reduce appetite and help with weight loss, and enthusiasm for them has soared.
The reality show star Sharon Osbourne, for instance, says she lost “too much weight” and got too skinny using the drug, which seems to be like saying at a job interview that you “work too hard.” It won’t exactly discourage its use, in other words.
Nearly 42% of Americans are obese, according to the U.S. Centers for Disease Control and Prevention, and that number is growing.
Walmart CEO John Furner recently told Bloomberg that his company had seen a “slight pullback” in food purchases due to the popularity of Ozempic.
Jefferies in a report earlier this month suggested that restaurants and “certain food products” appear to be the “most at-risk industries” over the longer term. If consumers have less of an appetite, then that could certainly affect restaurant sales.
Morgan Stanley estimates that 7% of the U.S. population could be on one of these drugs by 2035, which could lead to a softening demand at fast-food restaurants in particular.
It’s worth noting, however, that the drugs are expensive, at least right now, and a good portion of the U.S. population either cannot afford it or doesn’t have insurance to cover the cost. That automatically will limit its general growth.
But Stibel is convinced of its growth potential. “Twenty percent of the adult population will be on GLP-1s,” he said. That group on its own will eat less.
What’s more, they will cause others to eat less. “Have you ever gone to a restaurant that was a vegan restaurant if you’re not a vegan? More than likely, you’re going because somebody you go out to dinner with was a vegan,” he said.
“If you’re not on a GLP-1, but you go out to dinner with someone on a GLP-1, then she’s not going to want to order an app because she’s not hungry and she’s not going to want to order dessert,” Stibel added. “Even though you’re not on a GLP-1, you’ll be influenced.”
To be sure, after a generation of diet fads and other supposed miracle drugs (anyone remember Olestra? Good times.), it’s difficult to get overly enthusiastic about the potential of the latest miracle diet drug. The cost might thwart its use. Or maybe there are some side effects that turn people off. Everything in this piece should be taken with a grain of salt. As we noted at the beginning of this post, there is no evidence yet that Ozempic is influencing restaurant sales at all.
At the same time, longtime industry observers will recall some of those fads and the impact they really did have on restaurant use. Noodle and sandwich chains were hurt when people suddenly started going on the Atkins Diet, for instance.
Medications’ costs can fall over time as competing drugs come to market and generics become available. And Stibel is convinced that it will eventually come in pill form, which may remove one of the bigger barriers to its use, the fact that it’s injected. If the projections do come true, it could open the door to healthier fast-food restaurants and could put pressure on chains to cater to a public that just doesn't have the appetite they once did.
So how should restaurants respond? Stibel believes there could be opportunities. For instance, smaller portion sizes could become more popular. “You take your portion size down by a third and price down by 10%,” he said. Brands could tailor their menus to cater to that group, for instance.
It’s worth noting that people do love eating out. And they’ve continued to do it, even last month. They aren’t likely to stop, even if they are on one of those miracle drugs.