In a world where dietary choices constantly evolve, the clash between Big Food and Big Pharma takes center stage. Companies like Kellogg’s and J.M. Smucker are making strategic moves in the realm of snacking, while pharmaceutical giants introduce groundbreaking weight loss drugs. This article explores the dynamic landscape of food and pharmaceutical industries, with a focus on the growing trend of snacking among younger generations.
The Transformation of Kellogg’s:
For over a century, frosted cornflakes have been the cornerstone of Kellogg’s business. However, the company is now embarking on a significant transformation. On Monday, Kellogg’s will spin off its stable cereal business in favor of its faster-growing snack unit, rebranding itself as Kellanova.
J.M. Smucker’s Strategic Move:
Notably, J.M. Smucker recently acquired Hostess Brands, the maker of Twinkies, for a staggering $5.6 billion. This strategic move aims to expand its snack portfolio, reflecting the belief that consumers will increasingly indulge between meals.
Big Food’s Embrace of Snacking:
Big Food’s journey into the world of snacking began roughly a decade ago and has gathered momentum as sales in other grocery categories stagnate. The U.S. savory snacks market is projected to grow by 6% annually from 2022 to 2027, while sweet snacks are expected to see a 4.6% annual increase during the same period (HSBC). Accenture data reveals that approximately three-quarters of consumers plan to snack daily.
The Millennial and Gen Z Effect:
Millennials and Generation Z consumers are at the forefront of this snacking revolution. They snack more frequently than their older counterparts, driven by smaller, more frequent meals. Kelsey Olsen, a food and drink analyst at Mintel, highlights the shift in eating habits that creates more snacking opportunities.
The Rise of Weight Loss Drugs:
In parallel, Novo Nordisk’s Ozempic and Wegovy have gained momentum as prescription drugs to help patients shed pounds. These GLP-1 agonists suppress appetite and even lead some patients to develop aversions to high-sugar and high-fat foods, including popular snack brands.
The Pharmaceutical Impact:
With more than 9 million prescriptions written for GLP-1 drugs in the U.S. in the fourth quarter of 2022, and the potential for 24 million patients using them by 2035 (Morgan Stanley), food companies like Hershey, Mondelez, PepsiCo, General Mills, and Kellanova face potential challenges.
Not everyone in the industry agrees that GLP-1 drugs will spell doom for snack manufacturers. Smucker CEO Mark Smucker points out that consumers will continue to seek a variety of snacks, and affordability may limit the adoption of these costly drugs.
Adoption of GLP-1 drugs is expected to be gradual, providing food companies with time to adapt. They may respond with innovation, portfolio reshaping, and a focus on healthier options, putting more pressure on companies to update their offerings.
In conclusion, the ever-evolving landscape of the food and pharmaceutical industries presents challenges and opportunities. While Big Food is doubling down on snacking, the rise of weight loss drugs introduces a potential curveball. The future will likely see a delicate balance between consumer choices, affordability, and industry innovation.