Pepsi (PEP) and Coca-Cola (KO) shares are down slightly after Walmart's (WMT) warning about weight loss drugs, such as Novo Nordisk's (NVO) Ozempic, growing in popularity and impacting food sales. The worries are compounded by a report from BMO that the obesity drug market could reach $100 billion by 2035 causing further impacts to consumer habits for the companies.

Yahoo Finance Anchors Seana Smith and Brad Smith break down the current down trend for the beverage companies as well as what this means for the bigger picture of consumer habits in this space.

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Video Transcript

BRAD SMITH: Well, let's get into the food and beverage industry, a little more tasty here than oil. PepsiCo shares-- I'm not, you know-- anyway, PepsiCo shares, you're seeing them move on the day as well as Coke after weight loss drugs like Ozempic and Wegovy are spooking investors in the snack and beverage space.

Yesterday we heard from Walmart's US head of business on the impact of food sales. Not all bad news. Goldman Sachs is seeing mid single-digit volume growth for Pepsi in 2024. And that's without any more price increases here.

So shares of Coca-Cola are down fractionally. Shares of Pepsi down by about 1.2% right now. And Walmart really, I think, got out in front of-- or at least for the reaction that we saw from the street was trying to signal or at least couch some of the expectations for declining performance or worsened performance in some of the aisles in the store by saying, yeah, people aren't as hungry just because they're taking so many of these what's now viral weight loss-- you know, weight loss but also is a much larger kind of-- not even a nutrition.

It's just like a pill essentially. It's flabbergasting honestly at the of the day that so many people have gone into this and looked at it without some of the side effects that could take place. And I just kind of read through some of these. And I'm just like, my goodness, all right. Well, sure, yeah, it's gonna impact Pepsi and Coca-Cola and Walmart. But at the end of the day, like, we've got to be smarter about the things that we're putting in our bodies too.

SEANA SMITH: Yeah, certainly a lot of the warnings out there just in terms of the adverse side effects that are associated with these drugs, certainly very important to keep in mind. When we talk about the business implications of this, what it could mean for sales for some of these consumer-staple companies, obviously, it's something that has been warned about by some analysts.

Going back to March, Morgan Stanley was out with a note saying that they do expect some sort of hit here to some of these consumer-staple companies considering the fact that the pool of patients is expected to grow to 24 million people taking these types of drugs, about 7% of the overall US population. That's only just within the next decade.

So we talk about the pressure that that could put on companies. I think investors are gonna be paying very close attention to these earnings calls on the heels of what we just heard from one of Walmart's executives earlier this week. We have Pepsi coming out on Tuesday, next Tuesday, Coca-Cola on October 24.

So we're seeing some of the worry in the market when it comes to some of these consumer staples when you see the downward pressure in Coca-Cola, downward pressure in Pepsi for a second day in a row. I think everyone's trying to figure out exactly what that roadmap looks like going forward given the fact that if Walmart is right in terms of the trends that they are seeing and the fact that people are pulling back on some of their spending if they are taking these types of drugs. Clearly, that could mean a huge hit across the board for many of these companies.

BRAD SMITH: Yeah, this is even more. And it goes deeper than even Wegovy and Ozempic. It goes back to where people are getting this thought or getting this perception that they need to look a certain way, feel a certain way. There were studies that were initiated even prepandemic and leading up to the pandemic, talking about the dangers of Instagram and looking at so many different figures out there that would make you want to compare yourself.

And I think with all of that considered, it's time for us to perhaps reinitiate even more of those studies to talk about where there's still a role that social media has to account for, Meta platforms, whether it's Google, all of these different places where studies have revealed that there are issues that show body dissatisfaction, mental health issues all stemming from an exuberance or abundance of use of some of the platforms, too.

So that's not me just-- you know, I'm not a parent. I'm nobody's parent out there. You can decide what your own FaceTime, what your own screen time looks like. But at the end of the day, there are some serious disorders that have been started. And it's unfortunate as well as how that's impacted society.

SEANA SMITH: Yeah, extremely unfortunate, obviously. Very, very important to keep in mind.