Will weight-loss drugs lead to upheaval in the sugar market?

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The well being dangers of an excessive amount of sugar have been made clear, however the billion-dollar international market to provide it’s thriving. Gross sales of candy treats stay sturdy, and waistlines preserve increasing. May weight-loss medicine now succeed the place governments, scientists and docs have failed: crushing demand for sugar?

So-called glucagon-like peptide-1 receptor agonists (GLP-1s) contained in such medicine as Wegovy, Mounjaro and Ozempic curb customers’ appetites and are being hailed as recreation changers for tackling weight problems and doubtlessly a variety of different circumstances, from diabetes to habit. They may additionally result in an upheaval in sugar markets.

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Fears that People on GLP-1s will cease shopping for treats have already spooked companies and buyers. Mondelez and PepsiCo shares took a success after Walmart chief govt John Furner reported that prospects on these medicine have been shopping for fewer groceries. Hershey has additionally acknowledged experiencing a “gentle affect” on gross sales, attributed to the rising use of GLP-1 medicines.

Sugar merchants, for now, are disregarding issues about weight-loss medicine’ potential to dent demand. Maybe they’re battle-hardened — a long time of sugar-is-bad campaigns haven’t made a dent in international consumption, which has quadrupled prior to now 60 years, in accordance with Professor Paul Behrens of the British Academy. Candy treats nonetheless fly off the cabinets in most markets, and till just lately sugar costs have been driving excessive on climate woes and rising manufacturing prices.

There are different causes for merchants’ nonchalance. Up to now, Ozempic and different medicine are expensive and solely accessible to a small section of rich shoppers in developed nations. Even when these appetite-suppressing medicine do begin lowering demand, the pondering goes, it’ll be a gradual burn, giving markets and sugar producers loads of time to regulate.

However might this confidence be misplaced? Weight-loss medicine do work in curbing appetites. That makes them much more prone to reshape sugar consumption — and with it, the sugar market.

Stephen Geldart of London-based sugar service provider Czarnikow believes the GLP-1 medicine are already on observe to disrupt demand, beginning with rich nations. “I feel we’re simply within the early phases of it, partly as a result of these medicine are nonetheless fairly costly,” he advised me. “So that they’re not widespread — but.”

That “but” looms massive. Within the UK, for instance, the federal government plans to roll out Mounjaro on the NHS. Costs are prone to drop elsewhere too, particularly as pharmaceutical firms race to sell compounded variations of medication, circumventing patents.

If costs fall and entry broadens, the ripple results might attain middle-income and even growing markets. The weight problems epidemic and slew of well being circumstances that include it are usually not restricted to wealthy western nations. In India, the world’s greatest sugar shopper, charges of diabetes and weight problems are hovering. Indians devour a staggering 29mn tonnes of sugar yearly — 15 per cent of world demand. Even a modest uptake of GLP-1s there might shake the market in ways in which merchants would possibly discover arduous to disregard.

Geldart highlights one other phenomenon that ought to give sugar market contributors pause: heavy patrons of merchandise with excessive sugar ranges resembling ice cream, cookies and chocolate account for a disproportionate quantity of gross sales. If such customers reduce, there may very well be a huge impact.

Monitoring sugar consumption is notoriously difficult, although. There’s an actual threat, due to this fact, that these tendencies might develop below the radar earlier than the trade wakes as much as what’s taking place.

Nevertheless, a quiet drop in demand may very well be magnified by rising provide. Excessive costs over the previous 12 months have spurred a wave of sugarcane investments, significantly in Brazil. If manufacturing ramps up whereas consumption falters, the market might face a provide glut that drags costs decrease and forces a painful adjustment. Already, costs have fallen again just lately on decreased manufacturing worries. Uncooked sugar futures in New York have dropped from their November 2023 peak of 28 cents a pound, plunging this month to lower than 19.50 cents.

Sugar’s adaptability — it may be repurposed into ethanol for gas or bioplastics — would possibly present a cushion, particularly as demand for low-carbon fuels and renewable supplies grows. But this transition received’t occur in a single day.

Till now, the sugar market has not attracted a lot speculative curiosity. However how lengthy earlier than brief sellers seize a possibility to get a slice of the Ozempic pie?