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In brief
By now, it is clear from the media buzz surrounding new GLP - 1 diabetes drugs that usage by dieters, as well as by type 2 diabetes patients, has become an established trend. What is less obvious is the extent to which changing consumption patterns by users will impact traditional food categories — particularly snack foods.
How EY-Parthenon can help
An EY-Parthenon study shows the degree of penetration and the eventual impact are likely to grow faster and will have a greater influence on food consumption than previously understood, potentially impacting up to $12 billion in snacking sales over the next 10 years. Makers of snack foods should take steps now to understand how these changes will affect their businesses, and consider reshaping their product portfolios to maintain future competitiveness.
To understand how quickly usage of so-called GLP - 1 drugs is likely to grow — and the likely significance for food producers — EY-Parthenon professionals conducted a survey of 1,700 consumers, including GLP - 1 users and nonusers. The survey results indicate that adoption will be rapid and long-lasting, aided by increasing social acceptance of medical management of weight loss and growing pressure on insurance companies — from both manufacturers and consumers — to pay for them.
GLP - 1 drugs are a reality in the food market and warrant new thinking and new approaches by producers. Besides shedding light on the pace of changing consumption patterns, the survey uncovered new attitudes that are changing the way consumers shop, suggesting that food manufacturers can also adapt by adjusting their food ingredients and packaging.
GLP - 1 drugs (named for the glucagon-like peptide hormone they mimic) not only moderate users’ blood sugar levels but also affect their appetite, making users feel satiated and suppressing hunger cravings. Users tend to eat fewer chips and candy bars and opt instead for healthier alternatives. They consume up to 30% fewer calories and may lose 5% to 15% of their body weight.
For millions of frustrated dieters, GLP - 1 drugs might seem like an almost magical solution. The mass media have reported shortages of the drugs caused by high demand volumes.
While GLP - 1 drugs have been used so far primarily to manage diabetes and clinical obesity —defined as having a body mass index (BMI) above 30 — the EY-Parthenon survey confirms that the user base is changing as it grows to include more people with moderate weight problems and those who just want to look slimmer.
At the time of the study in early 2024, about 0.5% of the adult population in the US was using GLP - 1 therapies. The EY-Parthenon analysis projects usage to grow quickly in the coming 10 years to between 13% and 21% of US adults, a total market size of 30 million to 50 million people.
While usage for diabetes will continue to grow, the far larger growth driver will be users without a type 2 diabetes diagnosis who are focused on weight loss. About 61% of GLP - 1 users in the study were taking the drugs to treat type 2 diabetes, while about 39% of users — generally younger, wealthier and fewer clinically obese users — were using them to manage their weight.
The shift in these proportions is already happening. For example, at the time of the study, of those using GLP - 1 drugs for longer than one year, more than three-quarters said they were using the drug for health management, and less than one-quarter for weight loss. Among newer users — those who started using the drug within the previous 12 months — the split was closer to even, with 47% taking them to lose weight. Soon, weight-loss users will be the majority.
The trend is also evident in the fact that more people say they are using GLP - 1 drugs based on word of mouth or personal research in combination with a doctor’s recommendation, according to the survey, while those using them based solely on a doctor’s prescription declined among newer users. Rising consumer interest is also reflected in online search trends for weight management – related topics that have shifted to favor weight-loss drugs.
Remaining hurdles to widespread adoption are likely to be addressed in the coming months. Survey respondents who were aware of GLP - 1 drugs yet were not using them cited reasons such as the high cost (treatments currently cost over $1,000 per month), limited insurance coverage, required weekly injections for sustained results and concerns about side effects such as nausea. Many doctors believe that obesity is a complex issue and are hesitant to prescribe new drugs for general weight loss, according to reports. Manufacturers are addressing these concerns, for example, by producing new formulations with fewer side effects. Also, new studies showing effectiveness are prompting more doctors to prescribe these drugs.
The extent of private insurance and Medicare coverage for GLP - 1 drugs is continuing to evolve, and the most frequent questions asked are how quickly and to what degree insurers will expand coverage. Currently, GLP - 1 drugs are generally covered for type 2 diabetes, though many insurers still do not approve their use for clinical obesity not associated with a diabetes diagnosis.
Given the economic upside, manufacturers are motivated to reach agreements with insurers on acceptable pricing. Insurers may also calculate that the long-term health care cost savings due to a decline in obesity and related health issues is an attractive reason to pay for the treatments.
GLP - 1 drug use results in a measurable shift in users’ consumption behavior, with an especially large impact on several snack food categories. For example, survey respondents using GLP - 1 drugs for weight loss reported a sharp shift in their consumption from snack foods to healthy options such as proteins and fresh fruits and vegetables. Respondents claimed their consumption of foods across different snack categories dropped by between 40% and 60%, while their consumption of specialty and health foods climbed by nearly 50%. Proteins increased even more, by 65%, and fruits and vegetables by nearly 80%, users said.
Another variable that is difficult to predict is the degree to which GLP - 1 drug users will stay on the medications over an extended period, or even cycle on and off them. When users stop taking the drugs, caloric intake reverts to the original levels and the weight-loss effects go away. It is unclear what would happen to people’s habits after they stop using the drugs, or whether there would be a lasting impact on users’ health and consumption patterns.
So, what will be the economic significance for food manufacturers if 21% of US adults consume half as many snacks and sodas as they do now? The EY-Parthenon analysis shows a potential reduction in sales of as much as 3% across the salty, sweet and confectionary snack categories, likely impeding growth opportunities for manufacturers. Using a projection, that shrinkage could amount to an estimated impact to the snack food market growth of up to $12 billion — a potential $7 billion hit for salty snacks and $5 billion for sweet snack products. For manufacturers, the potential impact warrants a close look at their product portfolios.
While the effect of these changes on the food market has been minimal so far, packaged food manufacturers should prepare for GLP - 1 drugs to hinder growth in snack food consumption in the coming years and for the sector’s current 3% to 4% annual growth rate to slow significantly. The trend may make it even more difficult for companies already challenged in the current, price-conscious environment to grow in these categories.
Product portfolios are likely to determine potential winners and losers. To increase sales in a slower-growing or static market, packaged food manufacturers will need to win market share from competitors or seek opportunities in higher-growth niches, such as healthier products.
Company leaders should begin by assessing their product portfolios to understand their likely exposure before GLP - 1 drug usage becomes widespread, especially if they are concentrated in vulnerable snack food categories.
The EY-Parthenon survey also uncovered deeper changes among consumers’ buying habits that contain lessons for manufacturers. For example, GLP - 1 drug users said they care more than nonusers about calorie counts and health claims on food labeling when deciding to buy less of a given product, while concerns like brand name and product ratings dropped in importance. Food manufacturers should consider factors like these when developing and labeling new products. Indeed, some food companies are already including “GLP - 1 friendly” labels on frozen dinners, for example.
The next steps are to identify and implement strategies to optimize portfolios. Options could include one or a combination of several of these approaches:
Liam Li of Ernst & Young LLP contributed to this article.
The rapid adoption of GLP - 1 drugs and the resulting impact on snack food producers, retailers and ultimately consumers’ snacking habits offer invaluable information for industry players. Manufacturers and retailers will need to assess the exposure of their current product portfolios and manage their future strategies to adapt to the changing market dynamics.
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