CEO says weight loss drugs haven’t hurt Pepsi’s business

New York

Snack and beverage maker PepsiCo has so far seen a “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 are keeping an eye on the development of these new drugs and their potential impact.”

Some food analysts warn that long-term adoption of semaglutide drugs like Ozempic and Vegovy, which typically act to suppress appetite, could lead to meaningful changes in shoppers’ consumption habits. He says food companies need to prepare for that possibility.

About 1.7% of the U.S. population was scheduled to receive the drug semaglutide in 2023 — a 40-fold increase over the past five years. Already, its popularity has boosted the economy of Denmark, where Novo Nordisk, the maker of Vegov and Ozempic, is based. This has also led to supply shortages in the United States, while researchers have found evidence of troubling side effects. It’s still early days but, if widely adopted, the drugs could make huge changes to people’s health and the way they eat.

Even before these drugs hit the market, most major food manufacturers were reworking their portfolios to offer smaller sizes and healthier options. Laguarta said PepsiCo is doing the same and these changes could help if obesity drugs make a significant impact.

He pointed to efforts to reduce fat, sugar and salt in snacks and beverages, as well as efforts to cross-sell products, saying, “We think there are potential safety implications when it comes to some of the developments that may occur in the future.” Our portfolio strategy is very solid.” Small packages. He also said that there are still many questions about the durability of the drugs.

There may also be positive effects, PepsiCo CFO Hugh Johnson told CNBC on Tuesday morning.,

“I think anything that’s good for human health is really good for the company in the long run,” he said. “People would like to see breakfast continuing in some form,” he said. He said that if needed, PepsiCo will adapt its product offerings to changing tastes.

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

“Consumer preferences continue to shift toward smaller packages,” executives said in prepared remarks discussing the company’s third-quarter earnings Tuesday.

Laguarta said selling smaller packages has helped the company cope with declining volumes. Higher prices are also helping.

The company’s profit increased in the third quarter due to increase in prices of PepsiCo products.

The snack and beverage giant said it raised prices by an average of 11% globally, helping PepsiCo post revenue above analysts’ expectations despite a 2.5% decline in volume. Net sales rose nearly 7% to $23.45 billion in the third quarter.

As a result, PepsiCo raised its full-year forecast, the third consecutive quarter it has done so. The company now expects earnings per share of $7.54, up from $7.20 per share when it first issued the forecast in February.

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

Like other food companies, Pepsi has also increased prices to reduce inflation. Although there has been some improvement for US consumers, growth in grocery prices slowed in August, up just 0.2% for the month. The September consumer price index will provide a new reading on inflation on Thursday.

Sales of Gatorade, bubbly sparkling water and sodas also increased in North America, Pepsi said. The company also announced that it plans to relaunch the fan-favorite Soda Baja Blast, created in collaboration with Taco Bell, in three different varieties, including a zero sugar version.

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

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