How GLP-1 Drugs Are Changing Consumer Spending
Additional content provided by Tucker Beale, Analyst, Research.
GLP-1s (such as Ozempic and Wegovy) are revolutionary drugs that help patients control diabetes and lose weight by slowing the pace of digestion and increasing how full patients feel after eating. Despite GLP-1 manufacturers underperforming since mid-2024 due to outsized near-term expectations and competition from low-cost compounded therapies, we expect usage of these drugs will continue to grow. However, our focus today is not on the manufacturers themselves, but on how these drugs are shifting consumer preferences and the impact on consumer-facing industries.
In survey data collected by Bloomberg, respondents confirmed that rising adoption of GLP-1s is leading to less food and alcohol consumption. All else equal, we would expect these shifting preferences to act as a headwind to some consumer businesses such as restaurants, alcoholic beverage producers, and snack food manufacturers.
After an initial scare, investor concerns around sales impacts have dissipated due to only 8–10% of Americans using GLP-1s. A 2024 report published by PricewaterhouseCoopers (PWC) used survey responses to estimate that 30–35% of Americans are interested in using these drugs, pointing to a likely increase in adoption in the coming years. High treatment costs were the number one reason survey participants had not yet tried GLP-1s, making any decrease in out-of-pocket costs a potentially powerful catalyst for demand. In response to competition, producers have leaned on direct-to-consumer efforts, starting with their respective weight loss brands. Reuters reported on August 18, that Novo Nordisk will now also offer Ozempic for $499 a month to eligible U.S. cash-paying customers, roughly a 50% discount from the covered list price.
Expanded corporate insurance coverage is another potential catalyst for affordability, but the outlook is mixed. Between 2023 and 2024, the percentage of U.S. corporate insurance plans covering GLP-1s for both diabetes and weight loss rose from 26% to 34%. That said, based on survey responses collected by the International Foundation of Employee Benefit Plans, 57% of corporate plans will only cover GLP-1 usage for the treatment of diabetes. Of those corporate plans excluding weight loss coverage, 65% report that they are not considering making a change.
For now, a lack of affordability has softened the impact of shifting preferences and skewed the effects toward companies serving a higher-income clientele. Restaurant sales data reflect this, as in more recent periods, fine dining sales have struggled to keep up with the broader restaurant industry, whereas cheaper quick-service alternatives have seen strong sales growth. While there are several factors that drive demand for fine dining, like wage growth relative to inflation and consumer sentiment, as more people turn to GLP-1s, this will be an interesting trend to monitor. Some restaurants are already adapting by adding smaller-portion menu options targeted at this new consumer type.
With respect to U.S. alcohol sales, the 2014–2015 National Alcohol Survey showed that the industry is driven primarily by the consumption habits of the top 8% of U.S. drinkers. This group drives 51% of aggregate alcohol demand, so even minor adjustments to consumption habits within this cohort could have outsized impacts on the industry. The PWC report had this to say, “There is some indication that heavy drinkers in our sample reduced their alcohol consumption, since a third of them had moved into a lower category (e.g., heavy drinking to moderate drinking).” We have no way of knowing, or reason to believe, that this cohort will be overrepresented in the population of future GLP-1 users, but this demand concentration adds some risk to alcohol producers’ revenue forecasts.
While broader adoption may add headwinds to some industries, there are also opportunities. For example, within the consumer discretionary sector, while restaurant sales may slow, even moderate weight changes for patients could drive apparel sales. Similarly, waning demand for calorically dense snack foods could be replaced by demand for higher protein options as users aim to minimize muscle loss while losing weight. The LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) maintains a neutral weight recommendation for both the consumer discretionary and consumer staples sectors. While broader GLP-1 adoption will likely shift winners and losers within the sectors, we expect the aggregate impact to be marginal, particularly in the short term.
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