The Lempert Report LIVE

Transforming the Food Industry: The Impact of Weight Loss Drugs and Social Media

October 09, 2023 Phil Lempert Episode 98
The Lempert Report LIVE
Transforming the Food Industry: The Impact of Weight Loss Drugs and Social Media
Show Notes Transcript Chapter Markers

Are you ready to have your perspective on the food industry completely transformed? Today, we're discussing the shocking impact of weight loss drugs, Ozempic and Wegovy, on our food consumption and how Walmart's CEO comments on the impact. Believe it or not, we're talking about a startling 15% decrease in body weight in individuals taking these medications, and this is sending ripples through the food sector. From the future of the diabetic food market to the impending transformation in fast-food and pizza restaurants, we're covering it all. Brace yourself for an in-depth discussion on long-term effects and how the food industry is scrambling to change its ways.

But that's not all we're stirring up today. We're dissecting the alarming rise of eating disorders, a shadowy consequence of the social media boom. How can the joy of shopping for fresh food combat mental health issues? We'll explore this intriguing concept. Hear Laura Thornton's heart-wrenching tale, as reported in the Washington Post, on the harmful influence of social media on our youth. Then, we'll turn our attention to Stouffer's Advent Comfort Calendar and its potential to shake up the holiday food market. You wouldn't want to miss our critique on Christmas-themed Macaroni and Cheese and its possible repercussions on the food landscape. Stay tuned!

Phil:

Welcome to the Lempert Report LIVE. On today's episode Walmart CEO comments about Ozempic struck fear in the industry. Now we have yet another 'new' Coke. Everyone thinks that CPG brands are ripping us off. On Food Not Phones, how social media is feeding eating disorders. And on the Bullseye, another brand wants in on the Advent calendar craze. Let's get started. So, Sally. Last week was eye-opening in the food world when John Furner, who's the president and CEO of Walmart US operations, talked about the impact that Ozempic is having on his basket size for his customers. Now the interesting thing is that obviously Walmart weg Ozempic and through Wegovy as their pharmacies. So yes, they're, they're losing a little bit money there. But really what it's done is it's woken up the industry to the fact that we're going to have some severe changes. The average person who's on Wegovy Ozempic or decreased Wegovy by about 15 percent. It is projected that 7 percent of the population is going to be on weight loss drugs by 2035. The S&P 500 packaged food and meat sub index has dropped 14 percent so far this year, while the S&P 500 has climbed 11 percent. So you know, food companies have been nervous to begin with. Now, with this Ozempic, it gets even worse. Rabobank says that these drugs pose a new threat to the packaged food industry growth, and the quote is if two thirds of Americans are the target audience for these weight loss drugs, it's a huge thing. Let's not forget that when it comes to weight loss and these drugs, that's really a side effect. They're really designed for diabetes and the diabetic food market is on track to achieve a remarkable milestone, projected to reach 15.49 billion dollars in sales by 2028. And if we look at the numbers of people who have diabetes in estimated 537 million individuals age 20 to 79 currently, now that amounts to about one in every 10 people. It's going to rise by 2030 to 643 million people globally and by 2045, 783 million. No question about it. These, these products are going to. You know they're, they're on the way up, and especially since right now they're injectables. But a pill format is going to come out and I think you have a lot of people who are going to prefer the pill format than anything else. And Morgan Stanley did a survey of 300 people currently on either Ozempic or Wegovy. They found that the daily calorie consumption was diminished by 30 percent. 30 percent reduction in in food is huge for individuals, even if it's just seven percent of the population, and I think we're going to start to see some big changes both at food companies, at restaurants, as as the Ozempic Wegovy phenomenon gets even bigger.

Sally:

Yes, absolutely. There are so many things to think about. In a sense. Ozempic and Wegovy have gone viral on social media and I just read a study that 15% of Americans have personally used Ozempic for weight loss. That's 15%. That's not even including Wegovy, that's just Ozempic, and 47% say they know someone who has. But 70% of Americans are saying that they can't afford to take it. So there's another large majority of Americans that maybe would take it if it becomes affordable for them, which we may see as you're talking about the demand growing for it and it coming in a pill form. There are also concerns about people with that do have diabetes, the shortage of this drug with them. But what we're talking about here, and what we've heard from the Walmart CEO, is how this is affecting CPGs, how this is affecting food sales, and they're pointing at some of the companies like Nestle and Coca-Cola these companies that will be affected. We have in America a huge propensity for sugar in fat and these weight loss drugs may change our desires for that much sugar in fat. Our palates may change because, as people are using these drugs, they're also trying to balance it with changing their diet, their behaviors, and so if they're going to be looking for foods with less sugar and less fat to support this weight loss program they are on. Then these companies are going to have to adjust their products.

Phil:

They are. And talking about some of the changes, Jeffries did a survey of 800 people on these weight loss drugs and they found out, to your point 25% drank less alcohol. 42% ate food from restaurants less often. 44% say they ate smaller amounts of food from the restaurant. 42% eat less fast food and pizza. 46% drink less soda. Probably the most important finding that, I think, is that 70% of the people are more aware of the nutritional value of their food and beverage choices. Again, talking to your point about societal changes that take place, so it's not just the pill or the injection, but these kinds of things take a huge amount of impact on. Again, whether it's restaurants, can you imagine, if you're seeing 42% less eating at fast food and pizza places, what that does to folks like McDonald's and Burger King? And then, when we look at product categories, 44% had less salty snacks, 44% less carbs, 43% less sweet snacks, 30% less dairy and, on a positive note, 36% had more protein, 35% had more healthier snacks, 43% are eating more fruits and vegetables. So the impact here every CEO and Furner from Walmart was the first one to talk about this, but I've got to tell you all the retailers that I spoke to since the story broke. Also, some brands everybody's looking at this saying whoa, we're going to have to reduce package sizes from the brand side. Restaurants are going to have to offer smaller sized portions. This is just going to have a huge effect on the food world and I don't know whether or not people in the food industry really understand how important this is. And we don't know yet if there's any side effects, long term side effects to this. We don't know a lot, so there might just be a bubble that bursts here, but I don't think so. And I also believe that changing behavior when you're on one of these drugs and you lose weight quickly, it really reinforces what you're doing. You see a positive body image quickly and I think that having that kind of effect so quick really gets people on board of reading labels and eating healthier. Because, to the point of what Walmart is saying and Jeffery's and Morgan Stanley again, I don't want to reiterate it, but this is a major change for the food industry.

Sally:

Absolutely. It's a major change and an opportunity for Americans we look at, we are concerned about. We don't know what the long-term side effects are going to be. We don't know if this is sustainable yet for people, but we think about all of the people in America that are suffering from chronic obesity and this being a light at the end of the tunnel for them, as you're saying, an opportunity for them to see results but also to be motivated to change their eating habits, which we hope ultimately leads to the food industry changing their offerings to us.

Phil:

Yep Cleaning up ingredients. I mean, if these people are really reading those nutritional labels, reading ingredients statements, it's going to be a call to action. And just last week I'm going to give you two more examples then we'll move on. But the shares for major food companies declined when this announcement came out. Nestle shares declined by over 3%, general Mills 1%. Both Pepsi and Coke declines of half of a percent after falling as far as 5.2% during trading Shares for Kraft Heinz declining 2.8%. So I mean people are paying attention to this and the best quote comes from Jeffery's Financial. One of the analysts there estimates that United Airlines would save $80 million a year if the average passenger weight decreased by just 10 pounds. That would trim about 1,790 pounds from every United Flight, which would save about 27.6 million gallons of fuel every year. Who knew? You know, as America gets thinner, I mean the positive repercussions we're starting to see and I think it's a story that we're going to continue to see. And we'll probably get another bump once the pill format comes out for these products. So you know, remember when there was New Coke? Well, coke has, you know, come back from that fiasco with some limited editions and their latest limited edition Gail Cooper wrote about in Taste of Home she tried. It's called Coca-Cola Y3000. She says it's stupendously sweet. Number one that Coca-Cola's brags that its futuristic flavored and was co-created with artificial intelligence. It's the first limited flavor co-created with humans and artificial intelligence and the insights were gathered by both human and AI for this and what she talked about and I have not tasted this and, Sally, I don't think you've tasted it either.

Sally:

I have not.

Phil:

When you open the can, you almost get bold over by a super strong fragrance. The taste it's cherry, strawberry, raspberry, generic fruit punch. Those were the tastes that she sensed most. It tastes like candy, if you would. Is Coca-Cola onto something, using AI to develop this, or is it just a PR push that's going to go nowhere?

Sally:

Well, I definitely have not tried it, Phil, and I am very curious what AI has decided that we would like to taste in a Coke. I do remember New Coke when I was a kid and I think about. Well, there was no social media then, but even still without the social media, there was an uproar. People were not excited about New Coke and so they had to bring back that classic Coke for everyone. But they are a company that has experimented with a lot of limited edition flavors, and this article is saying that this one is kind of like what we called when I was a kid a suicide, where you would take your cup and you would go to the fountains and you would get a little bit of Coke, a little bit of Fanta, a little bit of Dr Pepper, a root beer just put a little bit of everything in there. It sounds like that. That is what this new futuristic AI Y3000 Coca-Cola is.

Phil:

What I really wish the Coke Y3000 would be water, just plain old water. You know we're talking about. You know over 40% of people having less soda when they're on Ozempic, Water. Guys, hey, Coke, Pepsi, pay attention to your water business. New survey came out from Deloitte about fresh foods that it's a key ingredient for grocers growth. However, what was interesting to me about this survey? Two thirds of consumers are willing to pay a premium for the best fresh food. That's up seven points year over year. On average, these consumers are willing to pay 28% more for fresh food than frozen, canned or processed alternatives. That's the bulk of the study. But what they found is they talk to consumers and they talk to grocery retail executives, and 85% combination of the retailers and consumers said that brands were raising prices more than needed for the purpose of increasing profits. Only 10% of the grocers surveyed said their food suppliers were raising prices to keep up with rising costs. So when we look at facts like this and you and I have spoken for months about these price increases consumers are up in arms about price increases and these brands just taking these price increases and saying that they deserve to have price increases. Their CEOs are making fortunes, their stockholders are making fortunes. But every time you and I go to a supermarket and we get our bill, we're almost in shock. And what I think is so important for brands to understand from this Deloitte survey as well as the recent report the future of grocery retail is that trust in the grocery store is more important than consumer surveyed, than trust in food brands or government regulators. So consumers trust their supermarkets. Don't screw it up, brands. I mean just taking these price increases I think are a mistake, don't you?

Sally:

I absolutely do, Phil. One of the really eye-opening points of this study for me was reading that nine and 10 consumers surveyed say fresh food makes them happy. We've been talking a lot lately about how we have a really big increase in our country in depression and anxiety. You think about when people go to the grocery store, even though the high price of food is bringing a lot of people down. Buying fresh food makes them happy. Is that because they like to take it home and make something from scratch? Is it because they know more about their farmers now and their local foods? Is it because of nutrition that they're interested in the nutritional profile of these products? I'm not sure, but what I'm getting from that is that retailers can really really take an opportunity to leverage this happiness that people are finding in shopping for fresh food. Also, if they are the trusted source for these shoppers, then communicating to them on how they are trying to manage prices of these foods that make them happy and that they want to go home with, and trying to find ways to offer more benefits in that way.

Phil:

I agree with you. I think it's a combination of all those factors. Again, fresh food has wind at its back, but again, let's remember, folks, that consumers are going to read the ingredients and just because it's fresh, you still have to have clean ingredients in it. But I remember going back probably 30 years ago, if not even longer, Campbell's soup tried to pull a fast one on consumers and they put soup in jars. They also had some salads in containers that they put in the dairy case. The idea was to get in on the fresh trend even back then. But the reality is the soup didn't need to be refrigerated and consumers figured that out really quickly when they looked at the date code on the jars and it was like a year, year and a half. That product died a really quick death. Because you can't fool consumers, Be authentic, be credible, be fresh. Talking about depression on Food Not Phones. Today what we're seeing is in the Washington Post. Laura Thornton wrote a very personal column about what happened when toxic social media came from my daughter. Her daughter is 13 years old and I'm going to just read from her story. My 13-year-old daughter was disappearing before my eyes. My cheerful, funny, energetic girl had returned from a summer away, a ghost of her previous self sallow skin, sunken eyes, skin and bones under bulky clothes, her mind in a fog. Basically because of social media, there's been an explosion of girls and boys starving themselves and making spaces precious, because the extreme diet culture fueled by social media is the enemy here. What do you think?

Sally:

Yes, I think this is a huge concern, particularly for our youth and for young girls, who are the majority our young girls that are affected by body image issues and by eating disorders. We're hearing that three out of five teens are. Their mental health is affected by social media. The problem we're seeing is that these platforms may be capitalizing on things that are negative for us, and that is the concern here. It was interesting to see in what Laura wrote here. She wrote about this study that was conducted from the Center for Countering Digital Hate and what they did was they briefly paused their TikTok account and liked other content about health or body image. Within 2.6 minutes, they were seeing content about suicide. They were seeing content about eating disorders. These algorithms are what we have to think about. We have to think about what these young girls are being exposed to, where we've got viral videos about what I eat in the day, viral videos about measuring the width of your thighs and your waist and showing your rib cages out. We've got clothing brands that are catering now to only extra small women. This is an incredibly negative force in healthy eating and healthy body image for young women. It is also deadly. It is the second most deadly mental illness, second to opioid addiction, in the country.

Phil:

What's interesting about Laura Thornton? Her focus and her job has been really looking at bad information infiltrating our body politic. She comes at this with really expertise in dis and misinformation. Whether it was about COVID-19, she worked on that whether it's about the Kremlin conspiracy theories, she's really an expert as it relates to this. When we think about. One of the points that she makes is her daughter, who now understands the impact of social media, described their meal plan with her and her friends where they had contests online with girls breaking about how little they eat. What I love is the ending of this piece. Her daughter's phone is now in a dumpster. She might get one without social media someday to talk to friends. I wish the tech giants and politicians fighting against reforms would spend one afternoon where my daughter is To your point. We've got a very serious problem here and I applaud the Washington Post and Laura for putting this out there, making people aware of it, and also it's another article that we will post on food not phones, so stay tuned. The next food not phones day is coming up. It'll be Thanksgiving, so check out food not phones comm for more information and how you can participate and why you should participate as well. Thanks, Sally. On the Bullseye, an Advent calendar is a special calendar. It's used to count the days in anticipation of Christmas. Originating from the Christian tradition, it begins on December 1st and ends on December 24th, Christmas Eve. Each day corresponds to a door or a window that's opened to reveal an image, a poem, a piece of chocolate or a small gift. The idea here is to mark each day of the advent season, the period of preparation that leads up to Christmas. Now, this tradition has its roots in 19th century Germany. Over time, the design and the presentation of advent calendars have evolved and Become very commercial, and now they come in a variety of forms, ranging from simple paper calendars to elaborate wooden or fabric creations. Many modern advent calendars, especially those that are designed for children, contain chocolates or toys behind each door. However, some religious or traditional calendars might have scripture or religious images behind every window to celebrate Christmas. In recent years, themed advent calendars have also become popular. For example, you might find advent calendars dedicated to beauty products or teas, or books and even wine. These specialty calendars catered of various interests but still retain the core concept of counting down the days to Christmas those 24 days. All these advent calendar has become a must-have for their shoppers. In the US, aldi introduced the wine advent calendar in 2018, which quickly became a sought-after item during the holiday season. Following that success, aldi then expanded their advent calendar lineup in subsequent years. Last year, in 2022, all these advent calendar lineup included hardselts or beer. Already, magic wine, emporium selection cheese, bay Island hot sauce, chocolate truffle and luxury chocolates. Stouffers, the brand that's now owned by Nestle, started selling frozen foods back in 1953, and For 2023, 70 years later, the brand has announced its first ever Advent comfort calendar and, of course, as you can imagine, it's filled with frozen foods. Seven of them, including family-sized macaroni and cheese. Family-sized lasagna with meat and sauce. Stover's bullfills chicken bacon ranch bowl not sure what that has to do with Christmas Stover sides, broccoli cheddar pasta bake. Stouffer sides, home style mashed potatoes. Stover's pepperoni French bread pizza and stover's ultimate 5G's Mac. Now it's only available on the shop Stouffers website and retails for $39.99. The first drop happened last week, on October 2nd, and it sold out. The next drops are scheduled for October 23rd, November 13th and December 4th. Now there's no mention on the website of shipping is included in the price and I guess I'll just have to wait till 12 noon on October 23rd to add it to the cart and see if they're charging even more To ship it to me. Pretty on-air marketing hats. I see a few problems with this brand extension. The first is that it's off-brand. The second is the assortment of foods, with a couple exceptions, doesn't tie into Christmas meals at all. Next come the fact that most of us wouldn't have room in our freezers for seven items, additional items, especially those family-sized boxes. Now the announcement on Instagram looks like the foods may be gift wrap and the post says that the comfort calendar is here to help you during the busy holiday season, whether in the time after Thanksgiving, when the last thing you want to do is to be in the kitchen, or the blurry days of Betwixt next, as the year is winding down. Now, I really do think that this one is a stretch for many reasons and, frankly, I think it's time that brands that are just scratching their heads, sitting in their little cubicles, on how to build buzz or get attention, should stay away from trying to connect Macaroni and cheese to the advent season. It just doesn't make sense. Thanks for joining us and we'll see you back here next week.

Sally:

Be sure to visit Supermarket Guru. com for the latest marketing analysis issues and trends, and don't forget to join us back here next Monday at 2: 30 pm Eastern for more.

Weight Loss Drugs and the Food Industry
Social Media's Impact on Mental Health
Critique on Christmas-Themed Macaroni and Cheese