Popular Weight Loss Drugs Could Kill Demand for Fast Food
When dealing with several billion in sales, fast food chains take a lack of demand for their products very seriously. Without scores of avid buyers, chains like McDonald's, Subway, KFC, and Taco Bell wouldn't meet expected revenue projections.
With Chipotle Mexican Grill preparing to start earnings season, even fast-casual restaurants like Chili's and Applebee's are watching their bottom lines with keen anticipation.
Insult to Injury
As we move into the holiday season, regional and national food chains are looking to buffer an already struggling sales outlook due to inflation-induced revenue cuts. However, the issue plaguing most brands is less about a lack of consumer income than a change in consumer desire.
As weight loss and general health start to take center stage in more Americans' lives, their cravings for fast food decrease, causing a significant headache for favorites like Arby's, Burger King, Wendy's, and other popular chain brands. No longer are average Americans looking for a quick, easy meal. Instead, they're pinching their pennies to purchase weight loss solutions like Ozempic and Wegovy.
Changing Face of Nutrition
When fast burgers and fries began rolling out, like an assembly line, hungry families and busy workers couldn't get enough of the hot and ready meals that filled them up for cheap. And for decades, western societies have led the way in demand for fried, greasy foods.
With the introduction of weight management and weight loss drugs, many fast food and fast-casual eateries are seeing a severe slowdown in the need for their menu items. This concern has investors looking hard at what's next for these embattled fast-food chains.
Peter Saleh, BTIG restaurants analyst, said this about investor concern over weakening demand for fast food. “It's very topical. It's kind of the top of the list right now in terms of concerns. Investors will likely want to hear more from these companies on the impact.”
Stock Investing Impact
When Walmart announced they'd seen a slight pullback from customers consuming weight loss supplements and Conagra Brands mentioned it might tweak ingredients or portion sizes, the S&P 500 reacted immediately, dropping 1.3% almost instantly.
This decline means that each chain brand is also suffering in their overall stock prices. Starbucks dipped 8%, likely less because of its more affluent customer base. Chipotle, McDonalds, and Yum Brands (parent company of McDonalds and KFC) saw double-digit losses.
Long Term Projections
Time is the great equalizer in anything dealing with spending trends. It ebbs and flows with consumer demand, and cravings for fried chicken and greasy burgers will likely return.
As inflation eases and the budget expands, the need to eat at home will also lessen, and more people will again find themselves in line at their favorite fast-food joints. The only indicator that matters is how long it will take for that easing to take place. For now, all fast-food and fast-casual dining establishments can do is bide their time.
Source: (AOL).