Weight-loss drugs are coming to bite a sugar industry in denial

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In a room filled with more than 800 sugar traders, Sally Lyons Wyatt, an executive at consumer researcher Circana, had an important message to deliver: Ozempic is coming for your industry.

“Does it have the ability to be huge in the future?” she asked during her speech at the New York Sugar Dinner earlier this month. “It does.”

Nobody appeared to be paying attention. As is traditional at the event, traders were preoccupied with the clock, having placed bets on how long the speech would last.

The oversight extended beyond the dinner. Traders, brokers and analysts met at conferences, individual presentations and meetings throughout New York Sugar Week, an annual event that gathers traders from across the world. They swapped outlooks on how much sugar would be available in the upcoming season, discussed the role of biofuels, and even argued about rules on the New York exchange.

Demand was a footnote. That’s even as executives from Walmart Inc. warned that Novo Nordisk A/S’s Ozempic and Eli Lilly & Co.’s Zepbound are impacting food sales, and multiple analyst surveys have showed that less-hungry customers are spending fewer dollars at grocery stores and restaurants. 

Sugar traders, used to seeing demand grow as population expands, could be overlooking the next big demand hit. The drugs, which cut cravings, will result in a decline in calorie consumption in the U.S. of 1.5 to 2.5 per cent by 2035, with a drop of as much as five per cent in the consumption of sweets such as baked goods, confectionery and soda, Morgan Stanley analysts including Pamela Kaufman said in a report last month.

Expanding market

Morgan Stanley forecast about a 10th of the U.S. population will be on the so-called GLP-1 medications — originally designed to treat diabetes but being used by many as a powerful weight-loss tool — by 2035.

“I’m spending a lot of time thinking about it because I think it could be really important,” said Stephen Geldart, the head of analysis at London-based commodities trader Czarnikow Group Ltd. “Maybe I’m wrong, but if no one else is paying any attention, that’s great. I’m quite happy to do things that no one else is looking at.”

Even with tight supplies and sky-high prices limiting uptake of the medications, sales of GLP-1 drugs for both obesity and diabetes already exceeded US$19 billion in 2023. The global obesity market alone could top $100 billion by the end of the decade, Goldman Sachs Group Inc. estimates, while Bloomberg Intelligence forecasts $80 billion of sales.

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More than 60 per cent of U.S. consumers taking the drugs said they had cut back on sweet treats like candy, ice cream and baked goods, and many said they had either significantly — or entirely — stopped eating those products, according to Morgan Stanley.

Not everyone in the sugar market is worried about weight-loss drugs. In New York, Carlos Murilo Barros de Mello, the head of sugar in the Americas at brokerage Hedgepoint Global Markets, said the industry hasn’t spent significant time estimating consumption because shifts are “minuscule” relative to production swings.

The impact hasn’t been felt yet as “it’s still very much further down the line,” said Kona Haque, head of research at ED&F Man. “And don’t forget, this is still very much an advanced-economy, affluent-society syndrome where people are trying to tackle obesity.”

Haque stressed that sugar demand is still growing in emerging markets, where the medications aren’t yet being marketed. And even in places like the U.S., there is still a strong need for sugar as many customers prefer it over alternatives like high-fructose corn syrup, said Plinio Nastari, founder of Brazilian consultants Datagro.

Global picture

“I suspect it’s not a big enough factor to be concerned about the bigger global picture,” said Tom McNeill, managing director at consultancy Green Pool Commodity Specialists. 

Demand growth has long been buoyed by increasing populations and rising incomes in regions like Asia and Africa. Sugar also still accounts for 80 per cent of global sweetener use, holding up against competition from substitutes like high fructose corn syrup, according to the Organization for Economic Co-operation and Development. 

Still, demand has taken a hit over the past decade as health conscious consumers cut back. Global consumption is growing at just 1.2 per cent a year now, compared to the 10-year average of 1.6 per cent, according to the International Sugar Organization.

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Global per capita sugar consumption in 2022 was just 22.1 kilograms, recovering slightly from a pandemic low but still 3.5 per cent below 2016 levels. European consumption took a similar 3.3 per cent dip from 2016 to 2022, while in the U.S., Mexico and Canada trade zone it dropped 6.1 per cent, ISO data showed.

As the use of GLP-1 drugs spreads, cheaper versions are also popping up. Once patents on branded drugs expire, so-called generics sold at lower costs could also boost the overall uptake.

In Brazil, local pharmaceutical company Biomm SA is already looking to supply a generic version of Ozempic once Novo Nordisk’s patent expires, which could happen as soon as 2026. Sales of that drug already represent a $600 million market in Brazil, according to investment firm Ace Capital, and as many as 7 million people could become users once lower-cost options hit drugstores.

A country like the U.K., for example, which consumes about two million metric tons of sugar a year, could see losses of “tens of thousands of tons,” Czarnikow’s Geldart said. “That sort of stuff at the margins, it makes a difference.”

Food diversification

GLP-1 drugs have already moved stock prices, with the S&P Consumer Staples Index falling last October after Walmart said consumers were buying less food. Analysts at Truist Securities downgraded shares for Krispy Kreme Inc. on uncertainty over the medications’ impact. Nestlé SA is even launching a new line of frozen foods specifically targeting users of GLP-1 drugs.

Back at the sugar dinner, Circana’s Lyons Wyatt encouraged companies to understand what GLP-1 users are “craving” and diversify product offerings, including with smaller serving sizes. But with nobody listening, even the executive joined in on the joke.

“I accept bribes,” she said, referring to how long her speech would last.


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