LIVE MARKETS-Weight-loss drugs pose new challenge for U.S. restaurants, BTIG finds

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WEIGHT-LOSS DRUGS POSE NEW CHALLENGE FOR U.S. RESTAURANTS, BTIG FINDS

A growing number of Americans using GLP-1 weight-loss drugs are cutting back on dining out, and that shift in behavior could be weighing on restaurant traffic, according to a survey by BTIG.

The brokerage polled 1,000 GLP-1 users in the United States to better understand how these medications are influencing eating habits, dietary choices, and restaurant visits.

By income cohort, the survey found that lower-income (defined as less than $45K per year) consumers accounted for roughly 1/3 of all the GLP-1 users, while 44% were upper-income (over $75K/yr), and the balance were middle income.

"We were very surprised by the findings, as we expected a much smaller portion of lower-income guests and a greater skew toward higher-income," said BTIG analysts Peter Saleh and Ben Parente wrote.

Roughly 70% of GLP-1 users reported visiting restaurants "less" or "much less" since starting the medication, and users were most commonly reducing consumption of carbonated beverages, pizza, burgers, and alcohol.

BTIG estimates that the restaurant industry could be experiencing a 50 bps to 100 bps headwind from lower-income guests on GLP-1s, and a 120 bps to 230 bps impact from all customers on GLP-1s.

"In our view, restaurant industry executives are too focused on providing deep value promotions and not focused enough on testing healthier and/or smaller portion items that may actually resonate more with these guests," the analysts said.

The GLP-1 drug class, which include Novo Nordisk's NOVOb.CO Wegovy and Eli Lilly's LLY.N Zepbound, has enjoyed unprecedented demand in recent years, with some analysts projecting annual combined sales of $150 billion by the end of the decade.

Doctors advise most patients on GLP-1 obesity drugs to stay on them to keep the weight off, but as more U.S. insurers restrict coverage people are trimming costs by stretching doses or forgoing expenditures like vacations to pay for the medication out of pocket.

"GLP-1s will be a headwind for the restaurant industry until we pass peak usage, when the number of users dropping off the medications is greater than the number of new users," Saleh and Parente said.

(Medha Singh)

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