On Friday, Nestle, the renowned maker of KitKat and Nescafe coffee, saw its shares come under pressure as investors pondered the potential impact of Novo Nordisk’s blockbuster weight-losing drug, Wegovy, and how it might affect consumer spending on food. The company’s shares declined by 2%, reaching their lowest level in over two years, contributing to a broader downturn in the pan-European food, beverage, and tobacco index (.S600FOP), which fell by 1.7%.
Nestle chose not to comment on its stock performance, while fellow industry giants Danone (DANO.PA) and Unilever (ULVR.L) also experienced declines of 1.5% and 2%, respectively.
Jon Cox, Head of European Consumer Equities at Kepler Cheuvreux, shed light on the situation, saying, “I think it comes after Walmart’s comments regarding the impact on weight loss drug consumers perhaps buying less.” He referred to Walmart’s U.S. branch CEO, John Furner, who told Bloomberg earlier in the week that the company had observed a slight decrease in food consumption as people turned to appetite-suppressing drugs like Wegovy.
Despite these concerns, Cox does not view this as a significant long-term risk for Nestle or the broader food industry.
Bruno Monteyne from Bernstein also acknowledged the potential impact of Wegovy but questioned the logic behind the sell-off. He pointed out that Danone sells a range of products such as water, baby milk powder, and yogurt, and it’s unclear how these would be negatively affected by GLP1/Wegovy, referring to a broader class of drugs.
Vontobel analysts similarly assessed the situation and identified limited risks for certain categories of Nestle’s products. They stated, “We see some potential risks in some of the company’s product categories, such as frozen food in the US or confectionery, but less so in the other key categories, such as coffee, pet food, infant nutrition, culinary, water, or Nestlé Health Science,” in a recent note.