PepsiCo CEO Ramon Laguarta today (10 October) dismissed rising concerns around GLP-1 drugs and their potential impact on food businesses.

It comes as the company raised its forecast for annual earnings once more despite falling volumes in the third quarter.

The chief executive described the impact of the appetite-suppressing drugs as “negligible” to PepsiCo’s business while speaking to analysts and investors following the group’s third-quarter results.

He said: “Overall, if you take global consumption, there are obviously a lot of question marks with regards to the obesity drugs when it comes to medical testing or scalability of the usage of this or what is the impact really on consumer choices. So, a lot of question marks.”

GLP-1s, such as the semaglutide marketed under brand names including Novo Nordisk’s Ozempic and Eli Lilly’s Mounjaro, were initially developed to treat type 2 diabetes but are being prescribed for weight loss.

Laguarta discussed how PepsiCo has seen “structural positive trends” overriding any kind of effect from GLP-1 drugs, but the Lays and Quaker Oats owner still has a “sound strategy” for “portfolio transformation” if trends change.

Portion-control packages, zero-sugar beverages and nutritious foods were at the forefront of the company’s prepared remarks following the earnings announcement.

“Everything we've been doing for the last five, six years when it comes to reducing sodium, reducing fat, reducing sugar, reducing the portions of our products, adding some new cooking methods to our snacks, those are all very positive trends that will help us pivot the portfolio if needed in the future. We'll continue to do it. Obviously, it's one of our key strategic pillars,” the CEO stated.

He added: “Our portfolio strategy, we think, is very solid when it comes to a potential protection against some of these future developments five, ten years from now.”

The rising use in the US of the GLP-1 drugs to suppress appetite and, as a consequence, lose weight, is causing some concern among investors in food and drinks companies.

According to Trevor Stirling, a managing director at AllianceBernstein and an analyst covering the beverage alcohol market for the US bank, the number of monthly doses being administered in the US of Ozempic, Wegovy and a third brand, Mounjaro, “are now at around 11m and rising”.

That level of treatments, he adds, “implies that about 2.4 million people, or just less than 1% of US adults over 18, are currently using these drugs”.

Share prices in some food and drinks companies listed in the US did take a hit last week in the wake of comments from Walmart, which said it was seeing an impact on the food shopping habits of those taking drugs Ozempic and Wegovy.

“We definitely do see a slight change compared to the total population, we do see a slight pullback in [the] overall basket,” John Furner, the CEP of Walmart’s US business, told Bloomberg. “Just less units, slightly less calories.”

In recent days, senior executives at US food manufacturers have been asked either on results calls or in media interviews about how they thought the growing demand for the drugs might affect their business. The message from them was, for now, they are keeping a watching brief and would make changes to their products if needed.

“If we end up seeing changes in consumer eating patterns – let’s say they go to smaller portions – then we evolve the innovations and we design smaller portions. If they switch to different types of nutrients, we evolve the innovation, we switch to different types of nutrients. If they change the kind of pack sizes they snack on, we’ll change that,” Conagra Brands CEO Sean Connolly said when the company reported its first-quarter results last week. “So this is the kind of stuff that will happen over five, ten, 15 years, not over the next six months.”

PepsiCo shares rose over 2% in premarket trading today (10 October) after the company reported it earned $2.25 per share, on an adjusted basis, beating analysts’ estimates of $2.15.

Continued price increases drove the positive results as the company’s organic volume fell 2.5% for the quarter. Volumes fell 1.5% for its snacks portfolio, falling 5% in its Latin America convenient foods business. The company does not publish brands’ volume results.

When asked about general volumes and whether consumers are leaning towards smaller pack sizes, Laguarta listed two “big variables” that the company is “trying to optimise”.

“One is consumer interaction with our brands. And the proxy we're using for that is units or specific purchasing act. And then the other one is obviously margin for the overall business. And those are the two variables that we're maximising. In both cases, units are growing much faster than volume.

“You mentioned consumers moving to smaller packs. We're also, in a way, facilitating that through our pricing and mix strategy. Then we're obviously optimising margin that, as you saw, it was a good improvement in our margin across the company.”

Nevertheless, PepsiCo raised its forecast core earnings per share growth to 13% at constant currencies this fiscal year, up from a prior estimate of 12%. Its organic revenue growth forecast remains unchanged at 10%.

The group also gave unusually early guidance for its fiscal 2024 – organic revenue growth of 4-6% and EPS growth in high single digits.

Lauren Lieberman, a Barclays analyst covering PepsiCo, wrote that a “beat and raise” was unexpected, “let alone the very early and constructive commentary on 2024 expectations”.

She said: “To us, results in aggregate speak to the increasing balance in the business model across US and non-US markets, and we see this as also supporting the company’s confidence in discussing the high-end of the long-term algorithm for next year.”

PepsiCo’s net revenue rose 8.9% year-on-year to $23.45bn for the three-month period, while operating profit jumped to $4.02bn.

The Frito-Lay North America unit reported a 7% jump in organic revenue to $5.95bn increase while volumes fell marginally. Quaker Foods North America increased to $747m.

Meanwhile, Latin America revenue – which includes food and beverages – was up 21% to $3.05bn and Europe up 2% to $3.7bn.