• Drug giants push government for PBS funding
  • This sparks shift to healthier snacks and less booze
  • Health-conscious food brands and alcohol-free drinks set to boom

 

Over the weekend, Novo Nordisk and Eli Lilly, the companies behind Ozempic, Wegovy, and Mounjaro, have made a request to the Australian government.

They want their weight-loss drugs to be added to the Pharmaceutical Benefits Scheme (PBS) ahead of the Federal Budget.

The PBS is a program that helps subsidise the cost of medications for Australians, making them more affordable.

Right now, these drugs are covered for diabetes, but not for weight loss.

With obesity affecting 6.3 million Aussies and projected to rise, both companies argue that subsidising these drugs for the disease would save the health system money in the long run.

“The cost of inaction is far greater than the cost of intervention,” Novo Nordisk argued.

At the moment, these medications currently cost between $345 and $645 a month, so many Aussies can’t afford them.

Health experts have mixed views on the long-term effects of these drugs, but some believe it’s critical to take action, especially as obesity has overtaken smoking as the leading cause of death.

The government’s decision, though, is tricky. While the UK has rolled out these drugs in its system, the price tag might be a big hurdle for Australia’s budget.

 

What do these drugs do to people?

Ozempic works by suppressing appetite and lowering blood sugar, helping people shed the kilos without having to worry about those “food cravings” that usually make a comeback after every diet.

As more Aussies get hooked on it, we could be seeing a drop in demand for unhealthy snacks, sugary drinks, and fast food.

Experts reckon sales of fizzy drinks, baked goods, and salty snacks could dip by 3% by 2035, as more people on Ozempic or Wegovy find themselves reaching for something healthier, or maybe just less.

A survey has already found that 77% of people on the drugs visit fast-casual spots less often. That’s a big hit for the likes of fast food chains that thrive on people grabbing a quick burger and fries.

“And acccording to the report, about 90% of those using the drugs said their snacking declined, 65% consumed fewer sugary carbonated drinks, and almost 20% gave up sugary drinks,” added Mark Dingley at consultancy firm Matthews Intelligent Identification.

 

Impact on food and beverage companies

Experts believe, therefore, that food brands that are already focusing on smaller, more balanced meals could capitalise on this shift by offering products that fit into the new health-conscious mindset.

In other words, a shift towards healthier eating could be a boost for stocks already offering nutritious alternatives.

Now let’s talk alcohol. If you didn’t know, Ozempic doesn’t just stop people from munching on chips; it also dials down cravings for booze.

A Morgan Stanley study found that 62% of Ozempic users drink less, and 22% quit alcohol altogether. For investors in alcohol stocks, that’s a big deal.

But here’s where the opportunity could lie: low and zero-alcohol drinks are booming. If you’re looking for a silver lining in that space, that’s where you’ll want to look, Dingley said.

Supplements-focused companies also stand to benefit, added Dingley, particularly those offering products that complement the weight-loss efforts of users.

Nestlé, for example, is jumping in with a whole range of goodies aimed at Ozempic users – snacks, drinks, and supplements packed with protein, fibre, and probiotics.

These “companion products” (also known as “fortification foods”) are designed to provide essential vitamins, minerals, and nutrients, helping people meet their daily nutritional needs while consuming smaller portions.

Last but not least, more at-home eating could explode because of these drugs, says Dingley.

With portion control top of mind, more Ozempic or Wegovy users are cooking at home, using meal kits and pantry items.

At-home meal solutions and DIY meal kits could become more popular, and companies offering these products are set to cash in.

So, what does all this mean for food and beverage investors in Australia?

Well… strap in, because the game is changing.

Demand for unhealthy, processed foods might take a hit, but there’s a huge opportunity in healthier options, smaller portions, at-home meal kits, and alcohol alternatives.

 

Food and beverage related stocks on the ASX

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This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.

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