Morgan Stanley warns snack companies that weight loss drug study showed 'significant reduction in food consumption'

Published Mon, Oct 23 20239:32 AM EDTUpdated Mon, Oct 23 20231:46 PM EDT

The use of Eli Lilly 's Mounjaro for weight loss can pull shoppers away from the snack aisle, though the transition will likely be gradual, according to Morgan Stanley. Mounjaro belongs to a class of drugs gaining popularity for their weight-loss capabilities. While its growth has been stymied by hurdles to off-label use, Mounjaro should see U.S. Food and Drug Administration approval to treat obesity by the end of 2023, analyst Pamela Kaufman said. Wall Street has been watching how these treatments shift lifestyle and habits. Kaufman said the pressure may be on snack makers such as Hershey , Mondelez , Campbell Soup and Kellanova if unhealthy cravings decrease, with the caveat that it may not be a major headwind for the companies until drug usage picks up. Kaufman noted a six-week study presented at ObesityWeek that showed users of Mounjaro cut calories and weight at a faster clip. The study also produced evidence that medication takers had a "significant reduction in food consumption," as well as fewer cravings for sweets and fast-food fats. "These results reinforce our views … that patients taking GLP-1 drugs experience significant changes in their food consumption with a large reduction in daily calorie intake due to a reduced appetite and fewer cravings, and experience a shift in their food preferences," Kaufman said in a note to clients Monday. "As highlighted in our prior research, we believe companies with high exposure to snacking categories … are likely to be most impacted by growing adoption of anti-obesity drugs, but believe the impact will be modest in the near-term as adoption is expect to increase gradually." Mounjaro patients cut calorie intake at lunch by 71%, according to the study. More specifically, those taking the medication reduced intake to 268 calories at week six from 955 at the start, while those taking the placebo increased their lunchtime calories over the course of the study. At the six-week point, Mounjaro patients lost about 7% of their baseline weight on average. Those taking Saxenda, another weight loss medication, shed 4%, while those on the placebo shed just 0.6%. The study also found those on the medication were notably less hungry before lunch. That reduction in hunger also influences the quantity of food bought and consumed, Kaufman said. While taking Mounjaro reduced food cravings overall, it had a particular effect on sweets, the study found. A measure of overall cravings showed a 38% decrease for those on Mounjaro, compared with 22% for Saxenda and 12% on the placebo. Sweets show a starker difference: Mounjaro users saw a 46% decline, against 26% with Saxenda and 15% with the placebo. All four of the snack makers Kaufman said to watch have lost share value in 2023. But Wall Street is split on how to play the stocks, according to LSEG, formerly known as Refinitiv. The average analyst recommends buying Hershey and Oreo maker Mondelez. But the average analyst is remaining on the sidelines for Campbell Soup, which has a snack division that includes Goldfish and Kettle Brand, and Kellanova, the company behind brands such as Pop-Tarts, Cheez-It and Pringles. — CNBC's Michael Bloom contributed to this report.