Weight loss drugs haven’t hurt Pepsi’s business, CEO says

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New York

Snack and beverage maker PepsiCo has so far seen “negligible” impact on its business from drugs used for weight loss or diabetes, CEO Ramon Laguarta said during an analyst call Tuesday.

Still, he said, the company is keeping an eye on them: “We’re observing the growth of these new drugs and its potential impact.”

Some food analysts have warned that long-term adoption of semaglutide drugs like Ozempic and Wegovy, which generally work by suppressing appetites, could meaningfully alter the consumption habits of shoppers. Food companies, they say, need to prepare for that possibility.

About 1.7% of America’s population was prescribed a semaglutide drug in 2023 — up 40-fold in the past five years. Already, its popularity has buoyed the economy of Denmark, where Novo Nordisk, maker of Wegovy and Ozempic, is based. It has also strained supply in the United States, even as researchers find evidence of troubling side effects. It’s still early days but, if widely adopted, the drugs could significantly change people’s health, and how they eat.

Even before these drugs entered the market, most large food makers have been reworking their portfolios to offer smaller sizes and healthier options. PepsiCo has been doing the same, and these changes could help if obesity drugs end up having a significant impact, Laguarta said.

“Our portfolio strategy, we think, is very solid when it comes to potential protection against … some of these future developments,” he said, pointing to efforts to reduce fat, sugar and salt in snacks and beverages, as well as selling products in smaller packages. He also noted that there are still several questions around the staying power of the drugs.

There could even be positive impacts, PepsiCo CFO Hugh Johnston said on CNBC Tuesday morning.

“I think anything that’s good for human health is actually good for the company in the long run,” he said. “People are going to want to continue to snack in some form or another,” he said. If needed, he added, PepsiCo will adapt its product offerings to changing tastes.

Already, the company has seen success with reduced sizes, which appeal to customers who want help with portion control or can’t afford larger packages.

“Consumer preferences have continued to evolve towards smaller packages,” executives said in prepared remarks Tuesday discussing the company’s third-quarter results.

Sales of smaller packages have helped the company deal with declines in volume, Laguarta said. Higher prices are also helping.

Price hikes for PepsiCo products boosted the company’s bottom line in the third quarter.

The snack and beverage giant said it increased prices globally by 11% on average, helping nudge revenue higher than analysts’ expectations, despite PepsiCo’s volume falling 2.5%. Net sales for the third quarter rose nearly 7% to $23.45 billion.

As a result, PepsiCo hiked its full-year forecast, the third consecutive quarter it has done that. The company now expects earnings per share to be $7.54, an increase from $7.20 per share when it first released the forecast in February.

Shares of PepsiCo (PEP) rose nearly 2% Tuesday morning.

Similar to other food companies, Pepsi has increased prices to mitigate inflation. However, there’s been some improvement for US consumers, with grocery price increases slowing down in August, up just 0.2% for the month. The September Consumer Price Index will provide a new reading on inflation on Thursday.

Pepsi said that in North America, sales for Gatorade, Bubly sparkling water and sodas also rose. The company also announced that it plans to relaunch the Baja Blast, a fan-favorite soda it created with Taco Bell, in three different varieties including a zero sugar version.

Consumers should also expect to see the new Pepsi logo, unveiled last March, on its products soon.

Sumber: www.cnn.com

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