What happened
Shares of Coca-Cola (KO 0.76%) were falling today over concerns that weight-loss drugs like Ozempic and Wegovy are leading customers to buy fewer groceries and consume fewer calories.
Walmart's U.S. CEO John Furner told Bloomberg that the drugs are leading to a "slight pullback in overall basket." He added, "Just less units, slightly less calories."
The news prompted a sell-off in the soft drink industry, with Coca-Cola finishing down 4.8%. Pepsico lost 5.2%, meanwhile, and other beverage stocks were down substantially as well.
NYSE: KO
Key Data Points
So what
The news confirms suspicions that drugs like Ozempic, which works as an appetite suppressant, are impacting the packaged food and beverage industry.
CEOs and investors in the industry have begun to study the effects of the new weight-loss craze. Walmart, for example, is looking at anonymized data that shows how shopping habits change once people start taking the drug. Ozempic works by mimicking a naturally occurring hormone in your digestive system that tells you you're full. Some have likened its effect to bariatric surgery.
Walmart had noted earlier that the weight loss drugs, which it sells through its pharmacy business, had given it a bump in revenue.
Now what
A 5% decline is a steep sell-off for a consumer staples giant like Coca-Cola or Pepsi, and it seems to assume it will permanently damage the soft drink industry, though it certainly warrants attention from investors.
Coca-Cola has been pivoting to healthier beverages for years and making moves like offering smaller soda cans, which should cushion some of the blow from the weight-loss phenomenon, however strong it may be. It also acquired the Costa coffee chain, branching outside of traditional packaged beverages and into hot drinks.
If Ozempic becomes a serious headwind, we'd likely see the company pivot further into health and wellness categories.
Investors shouldn't blow the comments from Walmart out of proportion as the financial impact is still unclear. For now, it's a good idea to keep an eye on the impact of Ozempic, but selling Coca-Cola stock on today's news seems rash.
