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Despite the obvious health risks of consuming too much sugar, the multibillion-dollar global market that supplies it is thriving. Sales of sweet treats continue to be strong and waistlines continue to expand. Where governments, scientists, and doctors have failed in crushing the demand for sugar, could weight-loss drugs succeed this time?
So-called glucagon-like peptide-1 receptor agonists (GLP-1), found in drugs such as Wegovy, Mounjaro, and Ozempic, suppress users’ appetites and potentially lead to obesity and a variety of other conditions ranging from diabetes to diabetes. It has been hailed as a game changer in tackling the addiction. It could also lead to disruption in the sugar market.
Concerns that Americans taking GLP-1 will stop buying snacks are already spooking companies and investors. Shares in Mondelez and PepsiCo fell after Walmart CEO John Furner reported that customers taking these drugs were buying fewer groceries. Hershey also acknowledged that increased use of GLP-1 treatments has had a “mild impact” on sales.
Sugar traders have so far dismissed concerns that weight loss drugs could depress demand. According to Professor Paul Behrens of the British Academy, they’re probably the seasoned ones – despite decades of ‘sugar is bad’ campaigns, global consumption has quadrupled in the past 60 years. It has not affected the quantity. Sweet treats are still missing from most market shelves, and until recently unfavorable weather and rising production costs had driven up the price of sugar.
There are other reasons why traders become complacent. So far, Ozempic and other drugs are expensive and available only to some wealthy consumers in developed countries. Even if these appetite suppressants start to reduce demand, it is thought that it will be a slow burn, giving markets and sugar producers plenty of time to adjust.
But is this confidence misplaced? Weight loss drugs can suppress your appetite. They are therefore much more likely to reshape sugar consumption, and therefore the sugar market.
Stephen Geldart of London-based sugar merchant Charnikov believes GLP-1 drugs are already on track to destroy demand, starting with rich countries. “I think we’re still in the early stages, in part because these drugs are still very expensive,” he told me. “So they’re not widespread yet.”
That “not yet” looms large. In the UK, for example, the government plans to introduce Mounjaro to the NHS. Prices are also likely to fall in other regions, especially as drug companies compete to sell combination drugs by circumventing patents.
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Lower prices and greater access could have ripple effects that reach middle-income and developing markets. The obesity epidemic and its numerous health conditions are not limited to wealthy Western countries. Diabetes and obesity rates are soaring in India, the world’s largest sugar consumer. Indians consume a staggering 29 million tonnes of sugar annually, which is 15% of the world’s demand. Even a modest intake of GLP-1 there can shake up the market in ways that traders find difficult to ignore.
Geldart highlights another phenomenon that should give sugar market participants pause. It says bulk buyers of high-sugar products such as ice cream, cookies and chocolate account for a disproportionate amount of sales. If these users refrain from using the service, the consequences can be significant.
However, sugar consumption is notoriously difficult to track. Therefore, there is a real risk that these trends could develop unnoticed before the industry is aware of what is happening.
But the increase in supply could magnify the quiet decline in demand. Rising prices over the past year have led to a surge in investment in sugarcane, particularly in Brazil. If consumption slumps while production rises, the market could face an oversupply that could force a painful adjustment as prices fall. Prices have already fallen recently due to concerns about reduced production. New York raw sugar futures prices have fallen from a peak of 28 cents per pound in November 2023 to less than 19.50 cents a pound this month.
Sugar’s adaptability (it can be recycled into ethanol for fuels and bioplastics) could provide a buffer, especially as demand for low-carbon fuels and renewable materials increases. However, this transition will not happen overnight.
To date, the sugar market has not attracted much speculative attention. But how long will it be before short sellers seize the opportunity to get a piece of Ozempic’s pie?