The consumer staples sector is facing significant pressures, with the recent news from Walmart (MDLZ), known for Oreo, saw its stock plummeting to its lowest since November 2022. Other affected companies include Kellanova (K), responsible for Cheez-It and Pringles, PepsiCo (PEP), and Constellation Brands (STZ), the producers of Modelo beer. In response to Walmart's revelations, Steve Sosnick of Interactive Brokers commented on the growing investor realization of weight loss medications potentially impacting a spectrum of companies.
In Europe, the sentiment was echoed with stocks of firms like Lindt & Spruengli, Anheuser-Busch, and Nestle are experiencing downward pressure. While part of the slump in consumer stocks can be attributed to rising inflation and unattractive dividends, the introduction and popularity of this novel class of weight-loss drugs have accelerated selling. Morgan Stanley's (MS) recent survey underlined the potential market impact, finding that individuals on these drugs tended to reduce their intake of meals, snacks, alcohol, and carbonated drinks.
Despite the prevalent sentiment, there are voices of skepticism in the market. Richard Saldanha of Aviva Investors has warned against overreaction, noting that it's premature to draw definitive conclusions about the drugs' long-term effects on consumer behaviors. Nestle's CFO, Francois-Xavier Roger, also minimized the potential threats posed by these medications, pointing out the high dropout rates of users and Nestle's resilience due to its product variety.
Going forward, the financial world is keenly awaiting PepsiCo's third-quarter results, expected next week. Sosnick predicts analysts will interrogate various food and beverage companies about these weight loss drugs and their potential repercussions on sales and consumer behaviors, as this topic becomes increasingly central to market discussions.
