McDonald’s stock took a 1.7% hit recently, and not because the company made some kind of misstep that made investors lose confidence. There is no new highly touted burger that flopped. The stock price dropped because of weight loss drugs.
Equity analysts at Redburn Atlantic downgraded McDonald’s stock from “Buy” to “Sell,” and the reason is GLP-weight loss drugs like Ozempic and Wegovy. Those drugs have so suppressed American appetites that fast food chains are starting to feel the crunch.
The analysts think McDonald’s could lose up to 28 million visits annually, which roughly equates to $482 million in lost revenue.
Are Weight Loss Drugs Hurting McDonald’s?
One of the reasons for that projected revenue loss isn’t that these weight loss shots are changing how people eat, but rather who is eating. People with a lower income make up a huge chunk of McDonald’s clientele.
But once they start taking GLP-1s, they don’t eat out as much. And it usually stays that way. Higher-income folks, on the other hand, briefly cut back before relapsing right back into Ronald McDonald’s loving embrace.
Redburn calls GLP-1s “demand disruptors” for the restaurant industry, suggesting we might see a cultural shift away from mass-market indulgence toward simply not eating as much. It’s not even like people are going to be shifting to a different, healthier cuisine.
GLP-1s reduce appetite, so the entire food industry across the board is probably going to be feeling the pullback.
What’s Next?
CBS News reports that from 1977 to 2008, calories consumed outside of the home tripled. We’re staring down the barrel of a future where that explosion in caloric intake could start creeping back. It’s not just the weight loss drugs that are affecting the market’s outlook on McDonald’s future. McDonald’s, and probably every other business in the United States, is fending off what analysts are calling “pricing fatigue.”
McDonald’s for two when neither member of a relationship wanted to cook that night used to be an inexpensive last-ditch option. But now, the value gap between cooking at home and eating out has significantly narrowed, to the point where there is almost no difference in price. Might as well stay home, it’ll cost about the same.
Some analysts aren’t convinced that this is the death knell for McDonald’s, and possibly all fast food chains across the board. Speaking to CBS News, Peter Saleh, the managing director and restaurants and food distributors analyst at BTIG Global Financial Services, thinks there isn’t that much overlap between McDonald’s regulars and people who can afford GLP-1 meds, which are still too pricy for most.
But one day they won’t be, and that’s probably when McDonald’s should start to worry. And those of us not on those medications will benefit from the barren drive-through lines.
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