Weight-loss drugs could revolutionise the economy – the investments to buy now
The new generation of weight-loss drugs are a boon for the overweight, but they also promise to change our relationship with food and revolutionise the economy, says Matthew Partridge
Obesity is a growing global problem and a real threat to the health of individuals. It is not just an aesthetic issue, but also a serious health concern – it is, to be blunt, very hard to be overweight and healthy, says Ali Khavandi, consultant interventional cardiologist at the Royal United Hospital Bath.
In the US more than 40% of adults are classified as obese, which has created a “health crisis” as a result of rising healthcare costs and reduced productivity in the workforce.
Obesity is even affecting military recruitment, making it a “pressing issue” for governments, says John Plassard, senior investment specialist at Mirabaud Group.
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There is good news, however. Governments are trying to encourage healthy eating. And the latest generation of weight-loss drugs seem to be highly effective. These drugs promise to shrink our waistlines and fundamentally alter our relationship with food, says Plassard. That has major implications for the food industry.
Weight-loss drugs are a game changer
The big breakthrough has been the development of so-called GLP-1 receptor antagonists, such as semaglutide, which are sold by Novo Nordisk under the brand names Ozempic and Wegovy (similar drugs are sold by other companies, such as Eli Lilly). These were originally designed to be a treatment for diabetes, but have been repurposed as weight-loss drugs because they mimic the gut hormones that give rise to feelings of satiety, hence reducing appetites and calorie intake. The popularity and impact of these drugs is such that restaurant owners have started to notice changes in ordering patterns – diners are already tending to opt for smaller portions, says Roel Houwer, a product manager at asset manager VanEck.
The drugs are a game changer, agrees Khavandi. They have only relatively recently appeared on the market, meaning we don’t yet know much about their long-term effectiveness and side effects. But there is no doubting their popularity. Patients who aren’t eligible for treatment on the NHS are buying the drugs privately from online pharmacies, which are themselves “struggling to keep up with the demand”. Some people only use the drugs for a short period before stopping, usually because of stomach problems or because they baulk at the thought of being reliant on a drug they have to inject.
But most people do stick with them, not least because the drugs kickstart a virtuous cycle “where you lose weight, so you feel lighter and maybe have less knee or joint pain, which in turn gives you more energy, so you lose even more weight”. Their use is only likely to rise as health systems make more people eligible for treatment and new forms of the drug are developed that have fewer, or more manageable, side-effects.
Is this the end for junk food?
Interestingly, the new drugs lead not only to a reduction in the amount of food that people eat but also to an improvement in the quality of the food they choose, says Carl Hazeley, chief analyst at fintech firm Finimize. A study by Walmart, one of the largest retailers in the US, found that stores with a pharmacy where people were able to pick up prescriptions for weight-loss drugs saw smaller food baskets passing through the tills, and healthier, less calorific food choices. It seems, therefore, that people on weight-loss drugs shift away from junk food towards healthier options.
This shift should be nudged further by the growing regulatory pressure on the industry to improve the quality of food. In the UK, for example, there has been a push by the government to get companies to reduce the amount of sugar and salt in their products, as well as to “crack down on junk food in general”. Shops in the UK cannot, for example, put sweets on display near the till, a rule which came into force in 2022, and there are restrictions on advertising that promotes junk food. The US is behind the curve on such measures, but “the push provided by the weight-loss drugs will hopefully prompt food producers to move away from empty calories”.
Other studies of consumer buying patterns confirm that the weight-loss drugs are having an impact at the till, says Martin Frandsen, a portfolio manager at Principal Asset Management. One showed that weight-loss drugs reduce overall grocery spending for most people, but that the impact is particularly large for low-income households. This group “ends up spending 8%-9% less on groceries, with big reductions” on the amount spent on “chips, savoury snacks, sweet bakeries and soft drinks as well as frozen food”.
Opportunities in healthier grub
Sounds like bad news for junk-food producers. But it might be a boon for other food companies. The same studies suggest that those on weight-loss drugs “actually end up spending more money on fresh produce and yoghurts”, says Frandsen. A rise in the amount of fresh produce consumed may seem logical, but why yoghurt? It may be that the drugs, as previously noted, are having a negative impact on the stomach and causing nausea, and so people are choosing things to eat that are soothing.
There is also evidence that the drugs boost sales of protein-rich foods, says Jeneiv Shah, portfolio manager for Sarasin Food and Agriculture Opportunities Fund. This is because those who take the drugs often exhibit muscle as well as fat loss and foods high in protein, along with regular exercise, build the muscle back up. This means there is going to be a big rise in demand for products that are “ready to drink”, such as protein shakes, and for foods such as yoghurts that have been enriched with protein.
All such trends will have a knock-on impact further up the supply chain of the food industry, says Frandsen. If people are buying more fresh produce, then you will also need to have better inventory control systems, for example, as fresh food has a much shorter shelf life. That could be a great opportunity for companies involved in creating such systems. Similarly, since yogurts tend to have other ingredients added, such as vitamins and probiotics, the rise in the amount consumed “will be good news for some of the leading ingredient players in the market”.
Desire dampeners
The primary purpose of the new generation of weight-loss drugs is, of course, to get people to eat less, but there is some evidence that they also have the potential to “make a profound impact on broader lifestyle choices in other areas – for example, by influencing alcohol and tobacco consumption”, says Dasha Fomina, an equity research analyst at William Blair Investment Management. Studies “suggest a particular decrease in the desire for sweet alcoholic beverages”, she says. Hazeley also points to preliminary studies that indicate they may be a desire dampener when it comes to bad habits.
This development comes against a backdrop of “a slow-burning downward trend” in drinking among young people, which “started 20 years ago”, says Aarin Chiekrie, an equity analyst at Hargreaves Lansdown. “Compared with previous decades, young people are now less likely to drink alcohol, and if they do, they start drinking at older ages, drink less often and consume smaller amounts.” Evidence for this can be seen not only in surveys of consumption but also from the fact that pubs are suffering. The number of pubs in the UK fell from 55,400 in 2010 to 46,800 ten years later.
But it’s not all bad news for the drinks companies, says Chiekrie. Consumers are definitely buying less alcohol overall, but many are shifting to a “buy less, buy better approach”, and a lot of companies are “pivoting their offerings to cater to this”. Premium and craft drinks brands, for example, “remain strong”, and there is a growing demand for alcohol-free beers, “which are becoming more socially acceptable to drink at events, more available at bars and (crucially) much tastier to drink” than previously available alcohol-free offerings. An example is Diageo, which invested heavily in Guinness 0.0, its alcohol-free stout. This doubled its sales in Europe in 2024 and the drink became the number-one non-alcoholic beer in UK licensed premises.
We can see similar trends in Europe and the US, says Houwer. A study by the European Commission’s Directorate-General for Agriculture and Rural Development, for example, estimated that in 2021 the market for low- and non-alcoholic beverages (although virtually all of it is for the nonalcoholic kind) had grown to €7.5 billion in the EU alone. The leading producer of non-alcoholic beer was Germany, which accounted for nearly a third of the EU’s output in 2019.
The vegan revolution
As well as drinking less, younger consumers are also moving away from dairy and animal products, either for ethical reasons, such as concerns about animal welfare or the impact on the environment or because of the supposed health benefits of a vegetable-based diet. Many people feel that the health benefits of such a move have been oversold. “There’s a reason that most diets around the world have always contained meats,” says Khavandi, “and that’s because when you eat meat the animal has already done most of the work of extracting the nutrients from vegetable matter for you.” A purely plant-based diet, by contrast, is often a nutritionally deficient one, which is “why most vegans end up having to supplement their diet artificially”. Meat-substitute products also tend to be packed full of artificial flavourings, so, as Hazeley says, “you end up replacing a moral problem with a physical one”.
Still, it’s hard to dispute that there has been a big increase in consumers’ interest in alternatives to animal protein, as shown by the range of different products now available. “Just a few years ago the only real alternative to milk from cows was soy,” notes Frandsen. Now, however, “things have developed so quickly that there are around ten different types of alternative milk, and if you go into any large coffee chain you can easily find other alternatives, such as almond, oat, or coconut milk”. Indeed, around 15% of the “milk” now sold in the US is plant-based.
The market for plant-based alternatives to meat is a little more complex, says Frandsen. Some consumers want their meat substitutes to taste like meat, others don’t. This diversity “has made it harder for producers to achieve enough scale to reduce costs”, which is why he recommends investing in companies that specialise in adding ingredients to food, rather than those that sell the final product. Yet this too is a fast-growing market. The initial hype surrounding products such as Beyond Meat and Impossible Foods has slowed, says Lale Akoner, a strategist at eToro, but “alternative protein technologies such as precision fermentation (using genetically modified yeast and bacteria to grow specific ingredients) and cultivated (laboratory-grown) meat are poised to drive the next phase of innovation in the sector”.
In sum, a combination of the rise of the new weight-loss drugs, health-conscious consumers, regulatory shifts and breakthroughs in food technology adds up to a “fundamental transformation” for the food and drinks industry, says Akoner. The battle for market share will be “fierce”, with those resistant to change risking “obsolescence”, but those who recognise these trends and act accordingly are set to “thrive”. We look at some of the best options for investors who want to buy below.
The best investments to buy now
Most of the funds focused on anti-obesity drugs invest in the drugs themselves. A way to benefit more broadly from changes in consumers’ tastes is to buy an exchange-traded fund (ETF), such as the VanEck Sustainable Future of Food UCITS ETF A USD Acc (LSE: VEGI). The fund aims to provide “relatively diversified access to companies at the forefront of sustainable and innovative food solutions” by tracking the MVIS Global Future of Food ESG index, says Houwer. Major holdings include Danone (Paris: BN), which is the third-largest holding. As Hazeley points out above, the tendency of anti-obesity drugs to produce stomach discomfort in some users is leading to an increase in demand for Danone’s yoghurts. The firm trades at 17.5 times 2026 earnings and on a yield of 3.14%. The VanEck fund has an ongoing charge of 0.45% a year.
An active fund worth considering is the Sarasin Food and Agriculture Opportunities P Acc. It is managed by Jeneiv Shah and Colm Harney and invests in firms around the world that will benefit from the growth of the agriculture and food sectors. Many of its holdings will profit from the rise of anti-obesity drugs, including BellRing brands (NYSE: BRBR), the fund’s second-largest holding. It has seen its sales more than double between 2019 and 2024, makes a popular ready-to-drink protein shake, which can offset the muscle loss from anti-obesity drugs, and is sold by large US supermarkets and wholesalers, including Costco (the fund’s largest holding). BellRing trades at 25.6 times 2026 earnings; the overall fund has an ongoing charge of 0.98% a year.
Another company held by Sarasin’s fund (as well as VanEck’s ETF), and which should also be a big winner from the rise of anti-obesity drugs, is Kerry Group (LSE: KYGA), which sells specialist ingredients that make branded products tastier and more nutritious. The need to reformulate and redesign food products so they work alongside anti-obesity drugs is likely to boost demand for Kerry’s services, says Shah, which will constitute major “tailwinds” for the company. Kerry’s normalised earnings per share have jumped by nearly a third since 2020, and are expected to keep on growing. Its stock trades at a relatively modest 17.3 times 2026 earnings and a yield of 1.45%.
Another strategy is to focus on food producers that are “positioning themselves well in the evolving health-conscious market”, says Plassard. He particularly likes General Mills (NYSE: GIS), which is “adapting to consumers’ preferences for cleaner ingredients and lower-calorie options” by “aggressively expanding into organic, high-protein and functional nutrition”. General Mills has a solid record of sales growth of around 3%-4% a year, and has grown profits by more than 50% between 2019 and 2024, with a double-digit return on capital employed. Its shares trade at 14.7 times 2026 earnings and offer a dividend yield of 3.8%.
While anti-obesity drugs, and a more general millennial move away from drinking, may depress alcohol sales in general, a few drinks companies should still do well. Among them is Boston Beer Company (NYSE: SAM), which Akoner praises for “innovating in alcohol-free options”. Its strength in speciality and craft beers, which are also popular with younger consumers, should also ensure that it keeps growing. Boston Beer Company has seen its sales grow by 61% between 2019 and 2024, more than justifying the fact that its shares trade at 20.3 times 2026 earnings.
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