The GLP-1 Effect and a Proactive Risk Management Strategy for Food & Beverage Inventory
The GLP-1 Effect and a Proactive Risk Management Strategy for Food & Beverage Inventory
By Kristi Faherty, Managing Director, Appraisal & Field Exam
The advent of GLP-1 receptor agonist medications is poised to become one of the most significant disruptors to the food and beverage industry in decades. These medications, initially approved for type 2 diabetes and now widely used for weight management, are altering consumer habits, from what they eat and drink to how much they spend. While the long-term adoption and full impact remain highly uncertain given unpredictable factors such as insurance coverage, accessibility, affordability, and potential side effects, appraisers must begin to monitor this shift now.
The Immediate Shift: Declines in Impulse and High-Calorie Categories
The most immediate changes are evident in consumption patterns. Recent data underscore the significance of this shift:
- Calorie Reduction: A 2024 study found that caloric intake from GLP-1 users dropped by more than 20% compared to non-users.
- Spending Cutbacks: Monthly grocery spending for GLP-1 users has reportedly fallen more than 30%.
- Targeted Consumption Drop: Recent data indicate that individuals on GLP-1s consume over 50% fewer sugary drinks and alcohol than non-users.
This behavioral change is translating directly to reduced demand for certain product categories:
- Processed Snacks: Categories like chips, cookies, and baked goods have already seen declines in spending, confirming a drop in impulse snacking.
- Sugary Ingredients: While no one expects staples like sugar to become obsolete, overall demand, especially from processed snacks and sweets, is projected to decline. This will likely accelerate the existing momentum toward natural sweeteners.
Inventory and Valuation in a Shifting Market
For manufacturers, the current inventory landscape presents complex valuation challenges, particularly for items most exposed to reduced consumption.
- Modeling Obsolescence: Companies must scrutinize their product portfolio at the SKU level. Existing finished goods inventory, especially high-sugar confectionery, large snack bags, and certain lower-margin alcoholic beverages, face an increased risk of becoming slow-moving or excess inventory. This necessitates a detailed SKU-level analysis to track sales, monitor aging, and model an emerging provision for obsolescence. Monitoring shelf life is extremely important for food deals for both finished product and raw materials, as the value of inventory diminishes the closer the product gets to its expiration. GA Group continues to evaluate aging, shelf life, and expiration dates within all our Food appraisals.
- The Wine & Spirits Challenge: The beverage sector is feeling the pinch. For wine, GLP-1 users often report that acidity (especially in red wine) can trigger uncomfortable side effects like nausea. For Spirits, and all alcohol, GLP-1 medications are altering consumer behavior by reducing cravings and slowing alcohol metabolism, forcing spirits brands to shift their focus from volume to quality. One study found wine drinkers reduced consumption the most (52%), followed by beer (43%) and spirits (40%). This compounds an already prevalent trend towards moderating alcohol consumption and existing pressures on the alcohol industry. Appraisals for high-volume, lower-margin inventory (like standard beer or soda) are most sensitive to these volume shifts.
Pivoting for the Future: Reformulation and Repositioning
Despite the headwinds, the market shift creates opportunities for agile manufacturers. The industry is already demonstrating a pivot toward "GLP-1-friendly" alternatives:
- Portion Control: A noticeable shift toward smaller portion sizes is underway across the industry.
- Nutrient Density: There is a broader market movement toward high-protein, nutrient-dense foods, including lean proteins, protein supplements, and high-fiber products.
- Targeted Offerings: Home meal kit companies (e.g., Factor, HungryRoot, Daily Harvest) are leading the charge by introducing smaller-portioned meals tailored for people transitioning on or off GLP-1 medications.
- On-Package Labeling: Companies like Conagra and Nestlé have begun identifying GLP-1-friendly or lower-calorie options on their packaging, signaling a proactive move to capture this new consumer segment.
The Path Forward
While ingredient sourcing challenges are not yet evident, the impact on consumer food spending habits, particularly a reduction in spending at fast food restaurants, is clear. At GA Group, our focus must be on continuous monitoring and modeling:
- SKU-Level Vigilance: Routinely evaluate inventory aging for sugary or high-carb items and measure the traction of new, GLP-1-targeted formulations.
- Product Adjustment: Monitor whether companies are successfully adapting product offerings toward smaller portion sizes and higher protein/nutrient content.
- Valuation Prudence: Be conservative in estimating the recovery rates for slow-moving inventory categories most exposed to the consumer pivot.
Kristi Faherty is a Managing Director specializing in inventory valuation for manufacturers and distributors, with a focus on industrial and wholesale inventory appraisals. She leads GA Group's Food and Wine & Spirits verticals, bringing nearly 25 years of experience in supporting asset-based lending through detailed, data-driven valuation analysis.
Explore Kristi's Perspective in Her Spotlight Article: Valuing What's Inside: A Conversation with Kristi Faherty