Sugar Traders In Denial As Ozempic Craze Ramps Up 

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by Tyler Durden
Tuesday, May 28, 2024 - 10:40 PM

The junk-food industrial complex is on notice after pumping American consumers with sugars and carbs for decades, sparking an obesity crisis that has weighed on the nation's healthcare system. Remarkably, big pharma's response to the obesity crisis is an injectable drug, while the federal government is nowhere to be found in promoting healthy diets and exercise to the masses.

The ongoing trading theme: "Ozempic is coming for your industry," has been a hit with Wall Street traders. Just look at the massive outperformance of Goldman's GLP-1 'Winners' basket versus the 'At-risk' Pair basket... 

At a recent NYC dinner with over 800 sugar traders, Sally Lyons Wyatt, an executive at consumer researcher Circana, warned, 'Ozempic is coming for your industry.' 

"Does it have the ability to be huge in the future?" Wyatt asked during her speech at the New York Sugar Dinner earlier this month. She added, "It does."

Bloomberg pointed out Wyatt's warnings went unnoticed as the bet on supplying obese Americans with sugary drinks and snacks is still in play. 

However, the bet on sugar and junk food could sour in the coming years as more GLP-1 medications—originally designed to treat diabetes —hit the marketplace or ramp up production.  

Source: Bloomberg

Morgan Stanley analysts, including Pamela Kaufman, recently told clients that GLP-1s could reduce sweet demand, such as baked goods, confectionery, and soda consumption, by as much as 5% by 2035. 

Meanwhile, Carlos Murilo Barros de Mello, the head of sugar in the Americas at brokerage Hedgepoint Global Markets, admits the industry has not spent much time estimating consumption shifts due to GLP-1s suppressing food cravings, indicating the moves are "minuscule" relative to production swings. 

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

Haque noted that sugar demand is still increasing in emerging markets, where the GLP-1s will likely not be available for years because of costs. 

According to the International Sugar Organization, demand has slowed over the years, now at 1.2%, versus the 10-year average of 1.6%. 

Source: Bloomberg

While the GLP-1 craze will take years and must go global to spook sugar traders, the one thing these folks fear is if the US Department of Agriculture actually banned purchases of unhealthy junk food and sweetened beverages, including soda, from purchased items by recipients of the Supplemental Nutrition Assistance Program — or SNAP (read: Five Simple Policies To Reset America's "Rigged" Health System).

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As a side note, obese rapper Lizzo responds to South Park by roasting her in the show "The End of Obesity." 

This is pretty accurate.