In college, one of my roommates gave me the nickname “The Eternal Snacker.” I was given this title because of my eating habits, which consisted of eating snacks such as potato chips and nuts after returning from the library late at night.
Now that I’ve been out of the classroom for more than a decade and have developed healthier eating habits, I can’t help but notice what options others are employing to suppress their appetites. plug. It seems like every night when I watch TV, commercials promoting diabetes and weight loss supplements like Ozempic come on like clockwork. We admit that these commercial jingles are catchy, but are people actually taking these drugs?
According to Ozempic-maker’s latest earnings report. novo nordisk, the demand for this drug and related treatments such as Wegoby, Saxenda, and Libersus is unprecedented. Wall Street suspects that the growing popularity of weight loss supplements will have a knock-on effect on other industries, particularly food and beverage, restaurants and brick-and-mortar retailers.
Just a few days ago, the world’s largest retailer walmart (WMT 0.55%), confirmed these speculations. Or did you do it?
Let’s explore what the market looks like for Ozempic and similar treatments, and take a broader approach to the impact these drugs may have on retail. While the broad assumptions about Ozempic’s impact on other companies may seem obvious, there are many conflicting data points floating around that make it difficult to assess whether a company like Walmart truly faces a threat. is becoming difficult.
How will Ozempic affect Walmart?
A recent report from Bloomberg addressed the impact Ozempic appears to be having on retailers and revolved around data insights uncovered by Walmart.It’s similar to CVS and the goalWalmart offers shoppers the option of a one-stop shop for groceries, essentials, prescriptions and more.
Although the exact details of the study have not been fully disclosed, Walmart executives have shed some light on the study. In fact, given the data Walmart collects from prescriptions and general shopping patterns, Walmart is able to build a cohort analysis that benchmarks who doesn’t take Ozempic and who does. On a deeper level, Walmart can see what products these people are buying and compare it to their previous shopping behavior.
result? Walmart U.S. CEO John Furner said the data shows a “slight setback in the overall basket” of people taking Ozempic. While this lower average cart price may seem like a major concern for Walmart, there is significant nuance to this statement.
More than meets the eye
When you first read Farner’s manifesto, it might seem like people in Ozempic are spending less money at Walmart. However, this is a generalization and a conclusion that may not be completely accurate. Rather, Farner says, people who undergo appetite suppressant treatment in particular Spend less on food at Walmart. But does that mean we’re spending less overall?
Business Insider recently featured reports published by the following companies: morgan stanley and learning about Ozempic’s impact on Walmart. The main point is that Furner’s comments were largely misinterpreted by investors and the media. As Business Insider reported, shoppers who took Ozempic actually increased Total amount spent at Walmart. What is changing, however, is the product mix.
Morgan Stanley research shows Ozempic shoppers are spending more in other categories. To support Morgan Stanley’s claims, I took a closer look at Walmart’s latest financial results. For the quarter ended July 31, Walmart reported the following by revenue category:
Category ($ billion) | Q2 2023 | Q2 2022 | % change |
---|---|---|---|
groceries | $80.6 | $74.9 | 8% |
miscellaneous goods | $29.1 | $30.1 | (3%) |
health and wellness | $14.6 | $12.3 | 18% |
Fuel, tobacco and other categories | $3.3 | $4.4 | (twenty four%) |
home and apparel | $2.4 | $2.5 | (3%) |
technology, office and entertainment | $0.6 | $0.6 | (11%) |
International | $27.6 | $24.4 | 13% |
Membership and others | $3.5 | $3.7 | (6%) |
total income | $161.6 | $152.9 | 6% |
There are two things that really stick out in my mind. First, although some shoppers are buying less groceries, overall grocery sales are increasing year over year. This is probably partly due to inflation, but I think there is a broader view. That means the population of people taking Ozempic and similar drugs has yet to offset the rest of the customer base when it comes to grocery shopping. In other words, the shopping behavior of people who did not take Ozempic exceeded that of people who used the drug, and their food consumption patterns changed.
Another big takeaway from the financials is the boom in health and wellness sales. People undergoing weight loss treatment may also gradually increase their spending on health and wellness subsectors such as diet supplements and exercise equipment. Although it seems too early to know for sure, this speculation has some value.
Is there a larger theme here?
Looking at Walmart’s current situation, it’s hard not to feel a connection to the emerging world of artificial intelligence (AI). Over the past few months, Wall Street analysts and investors have been obsessed with the latest advances in generative AI.big tech companies etc. alphabet, microsoftand Amazon Companies are aggressively investing in their own language models and integrating this technology into disruptive areas such as cloud computing.
But if you narrow your perspective, the emergence of AI could have a big impact on more than just the software business. It’s unclear if Walmart uses any specific AI tools, but it’s safe to say that the company relies heavily on data to analyze consumers’ shopping habits. Broadly speaking, I think the impact of AI is currently underplayed as it applies to the retail industry.
It’s easy to fall into the trap of thinking that traditional retailers are facing an existential threat from e-commerce businesses and gig economy services. But contrarians say Walmart, Target, costco Given their vast number of stores and respective brand assets, they are well positioned to benefit from changes in broader shopping trends.
As artificial intelligence begins to take shape and play more of a role in digital transformation, retailers are likely to be the biggest buyers of this technology. Additionally, I personally feel that Walmart’s research shows how advanced the company’s data capabilities are already and sheds light on how the business as a whole can evolve.
Walmart already collects large amounts of data and leverages that repository to discover insights into consumer behavior. The company’s strong balance sheet and strong online and brick-and-mortar presence provide a level of flexibility not found in its competitors. For these reasons, I think investors looking for discounted or lesser-known AI opportunities would be well served by turning to retail. And for me, it proves why Walmart is king.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Adam Spatacco has worked at Alphabet, Amazon.com, Microsoft, and Novo Nordisk. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Costco Wholesale, Microsoft, Target, and Walmart. The Motley Fool recommends CVS Health and Novo Nordisk. The Motley Fool has a disclosure policy.