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Ozempic Could Reshape US Retail
Semaglutide could have a substantial impact on the consumer packaged goods industry.
- By
- October 14, 2024
- CBR - Marketing
Ozempic has taken the media and public opinion by storm. Hailed by medical studies as a game changer in America’s war on obesity, and buoyed by a host of celebrity endorsements, the antidiabetic drug and its pharmaceutical cousins such as Wegovy, all versions of the drug semaglutide, have seen prescriptions more than triple since 2020, according to a report from healthcare-analytics and market-research company Trilliant Health.
But as these medications revolutionize the country’s weight-management culture, alarm bells are sounding about Ozempic’s potential side effects—economically speaking. Walmart US CEO John Furner in late 2023 cited the “Ozempic effect” as the cause of a “slight pullback in the overall basket,” telling Bloomberg that the surging use of Ozempic was driving a customer tendency to purchase “less units, slightly less calories.”
Semaglutide has the potential to reshape the US economy, research suggests. Aljoscha Jannsen of Singapore Management University finds that sales of consumer packaged goods—processed foodstuffs, snacks, and sugary drinks, in particular—are highly susceptible to the Ozempic effect.
Janssen conducted his research using NielsenIQ’s Consumer Panel Data housed at Chicago Booth’s Kilts Center for Marketing. Analyzing 14 years of purchasing data through 2020, he finds that US households over time became more concentrated in their shopping habits. Fewer consumers accounted for an increasing share of the purchases made within different product categories. For example, in processed foods and beverages, just 10 percent of the total consumer base made more than 60 percent of all purchases on average, he finds. He deems this small group of people “over-consumers.”
The biggest losers
The research finds a strong link between people who purchase insulin syringes, likely for use in treating diabetes, and diet pills and those in the top 10 percent of households buying unhealthy food items. Companies heavily reliant on these high-spending consumers could be at risk with the introduction of semaglutide drugs, including Ozempic.
They hold a particular power over manufacturers and retailers of processed food and beverages, he argues. Because the businesses are so reliant on them for the bulk of these sales, any change in purchasing habits, however small, is likely to have an outsize impact, be it positive—or negative.
Indeed, Janssen finds significant fluctuations in consumer behavior over time, a “seasonality” in consumption that was particularly marked in the processed foods and beverages category. The smaller pockets of consumers who purchased most of these products also tended to limit or abstain from buying them altogether at different times of the year. While Janssen can’t say whether these households pulled back for dietary, health, or cultural reasons, he finds that “unhealthy” foods and beverages were about 10 percent more prone to this kind of purchasing volatility than other product groups.
Could these overconsumers also be more prone to using Ozempic? If so, the effect could expose retailers to further risk and volatility, Janssen reasoned. He looked at the purchase of insulin syringes and diet pills as an indicator, figuring that consumers buying these products likely struggled with diabetes or weight. Households who bought 30 percent more of these than the average did were also likely to be overconsumers of processed food and drinks, he finds.
More than 9 million Americans (about 3 percent of the population) were prescribed semaglutide medicines in the last quarter of 2022 alone, according to Trilliant Health, and J.P. Morgan Research has forecast that obesity drugs will reach an estimated 9 percent of the population by 2030. US retailers and CPG manufacturers would do well to prioritize their strategic adaptation, advises Janssen. He recommends reevaluating their overdependence on concentrated consumer segments, as well as developing more resilient and flexible strategies as consumer health choices continue to evolve.
Aljoscha Janssen, “Consumer Concentration and the Risk of the ‘Ozempic Effect’ in the US Retail Market,” Working paper, December 2023.
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