Kellanova bets on snacking as Ozempic, Wegovy take off

For more than a century, frosted cornflakes have been the backbone of Kellogg’s business. That changes Monday, when the company will spin off its stable cereal business in favor of its faster-growing snack unit and rename itself Kellanova.

The spinoff comes weeks after another wager that consumers will graze between meals, when J.M. Smucker bought Twinkie maker Hostess Brands for $5.6 billion in a bid to expand its snack lineup.

But food companies’ major bets on snacking come as investors fear the looming danger of Big Pharma’s blockbuster obesity and diabetes drugs Wegovy and Ozempic. Many investors have high hopes for the pharmaceuticals’ future, but their success could mean slower sales for the companies that produce Oreos, Doritos and Hershey’s Kisses.

Big Food’s bet on snacking began roughly a decade ago, and it’s only accelerated as the rest of the grocery aisles see sales stagnate, particularly as prices rise. The U.S. market for savory snacks is expected to grow 6% annually from 2022 through 2027, and sweet snacks’ sales are expected to rise 4.6% annually during that time, according to HSBC. Roughly three-quarters of consumers plan to snack every day, according to Accenture data.

Millennials and Generation Z consumers are fueling the trend. Younger generations snack more often than older consumers, said Kelsey Olsen, food and drink analyst for market research firm Mintel. Millennials and Gen-Z consumers tend to eat smaller meals that are closer together, creating more occasions to grab a snack.

At the same time, Novo Nordisk’s Ozempic and Wegovy have taken off, fueled by prescriptions to help patients lose weight. The drugs, known as GLP-1 agonists, suppress appetites by mimicking a gut hormone. Some patients even report developing aversions to foods with higher sugar and fat content — a category that includes many big snack brands.

More than 9 million prescriptions for these kinds of drugs were written in the U.S. in the fourth quarter of 2022, according to a Trilliant Health report.

Morgan Stanley estimates that the number of patients taking GLP-1 drugs could reach 24 million, or nearly 7% of the U.S. population, by 2035.

If so, consumption of baked goods and salty snacks could fall 3% — or even more if the new eating habits of the people using the treatments extend to their broader households and friends, according to Morgan Stanley’s research. That puts companies like Hershey, Mondelez, PepsiCo, General Mills and Kellogg’s successor Kellanova at risk.

But not everyone in the industry agrees with that assessment.

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