Private equity's Ozempic diet
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Some private equity firms are pulling back from investing in consumer companies that could be negatively impacted by the GLP-1 boom, believing that profits will get squeezed as obesity rates fall.
Zoom in: That could include certain snackmakers, alcohol producers, or restaurant chains. Or gyms. Or grocery, which earns much of its meager margin on items that many GLP-1 users no longer crave.
- "Even if the types of foods don't change for someone on a drug like Ozempic, the amount of consumption usually does," one PE pro explains.
The big picture: These investors are betting on widespread GLP-1 adoption, maybe even to the point where taking such medicines for weight loss becomes as routine as taking aspirin for headaches or antihistamines for seasonal allergies.
- Private equity deals are particularly susceptible to such trends, they argue, because of their long-term horizons.
Yes, but: It's not a glidepath. There are still many hurdles, including cost/reimbursement, research on side effects, and social acceptability of dropping pounds the new-fashioned way.
- And there are still plenty of dealmakers who expect America's bad health habits to prevail.
- "People always overreact," a veteran dealmaker argues. "Whether it was the Atkins diet or food delivery during COVID or when the government wanted restaurants to put caloric information on the menus. Even if 15% of the population goes on a GLP-1, it's not like they stop eating. It's just a percentage of a percentage."
The bottom line: The composition of America's consumers is beginning to change, quite literally, and private equity may change with it.
