Where Nestle sees opportunity in the weight-loss drug craze

There have been some fears that GLP-1 weight-loss drugs could cause a decline in snack food sales. But European food giant Nestlé (NSRGY, NESN.SW) sees a unique opportunity. CEO Mark Schneider says the company's nutrition products could help those who use medications like Ozempic and Wegovy, who may need foods with additional nutritional benefits.

Yahoo Finance's Josh Schafer, Brooke DiPalma, and Pras Subramanian discuss the comments in the video above.

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Editor's note: This article was written by Stephanie Mikulich

Video transcript

PRAS SUBRAMANIAN: We've been hearing about companies like Walmart and Coca-Cola keeping a watchful eye on weight loss drugs like Ozempic and Mounjaro, concerned about the impact on food sales. But European food giant Nestlé says they may have found an opportunity. CEO Mark Schneider today saying that there could be increased demand for products that address nutrient deficiencies, like Nestlé's vital Performance Protein for Muscle Mass and Garden of Life Probiotics for Gut Health.

But Nestlé, look, they make everything from chocolate to Purina Cat Chow, OK? So this is a massive, massive company, [INAUDIBLE]. 90 brands, you know, hundreds of brands, you know, water. But the thing is that they can pivot and they can do this kind of in a way that say, hey, you know, if the market's going this way, we're so vast that we can actually have like the ancillary to Nestlé chocolate, which is like vital proteins, right? So they can do that. I think that's probably going to be a focus of the company and other big giant CPG companies, food giant company, staples companies that are going to have to try to compete in this world.

BROOKIE DIPALMA: Yeah. Protein is the name of the game for 2024. So many companies looking to get in protein. We heard from Conagra earlier this week that they're trying to introduce more frozen meals with their Marie Callender brand. That's more protein-dense. And you know, snacking is getting so big, but consumers are also more mindful given that this has been in the news lately. They want a more protein-dense snack. I mean, that's more opportunities for companies like PepsiCo, for Coca-Cola, really trying to play up this impact of GLP-1 that we've seen since now really in the news at the end of 2023 in October.

JOSH SCHAFER: You got to love just the flip that we saw here.

BROOKIE DIPALMA: The flip, the complete flip.

JOSH SCHAFER: It's February, so it was about six months ago, the GLP-1s were bad for all food companies, right, because people weren't going to eat anymore. And now I think people are starting to realize that GLP-1s also come with a diet when you listen to a lot of these companies talking about people taking them, right, you-- and it's a tailored diet. And so it feels smart to me for some of these companies to say, OK, now, we can get into that tailored diet space and actually sell more products and more diversified products than we used to sell. And basically, these might be net good for us.

I don't know. I just appreciate the spin. It's a long way we've come in six months.

BROOKIE DIPALMA: The spin on portion control, the spin on pack sizes. It's a new wave, a new opportunity.

PRAS SUBRAMANIAN: I mean, speaking personally, I kind of want more protein focus or heavy snacks. Yahoo people, the snack machine over there, whatever. Would like-- you know what, I mean, like, I think there's an opportunity there for the Nestle to grow.

JOSH SCHAFER: Quick snacks, right?

[INTERPOSING VOICES]

PRAS SUBRAMANIAN: Like, where are the protein-forward snacks that are like cheap and readily available? Because I think when you're at the worksite, like, you want to eat, you don't want to run out every time.

JOSH SCHAFER: You want the good macros coming from Nestle, Pras. We'll put it a call. We'll see-- we'll see if they can get a macro count or not.

PRAS SUBRAMANIAN: --the Purina Cat Chow.

BROOKIE DIPALMA: But I definitely do think that zero sugar, plant-based protein, we've seen this really ramp up in recent years. But now companies really doubling down and taking on this opportunity as innovation really comes into play, as we sort of put behind all the COVID-19 supply chain issues and so on and so forth that we saw a few years ago. But the GLP fear really baked in now. It sort of has settled in. It was such a hit to stocks back in October. And now that's sort of settled out for sure.

JOSH SCHAFER: And there was one other thing, too, on the GLP-1 space that came out today that I found interesting, guys. Goldman Sachs coming out and saying that they think that GLP-1s could actually add 1% to GDP eventually at some point.

PRAS SUBRAMANIAN: 1%?

JOSH SCHAFER: 1% to GDP. A sanctuary saying that because of how obesity works in America, and there are so many obese people, and it makes people unproductive, you're going to the doctors, et cetera. If you were to remove that and make those people healthier, it would actually contribute more to the economy. So sort of another thread on the GLP-1 story that will be interesting to follow and see how that develops.

BROOKIE DIPALMA: There are so many tentacles in this story, so many different retail to airlines to everything.