Stocks in the food and beverage industry experienced their most challenging week since May 2022, further extending the declines seen in the preceding weeks.

The First Trust Nasdaq Food & Beverage ETF (FTXG  ) plummeted by over 5% this week, marking its third consecutive week of losses and the ninth negative week out of the last ten.

The industry gauge has now fallen to levels last observed in February and November 2020, returning to pre-pandemic levels.

Beyond the common factors, such as Treasury yields affecting the broader stock market over the last month, the food and beverage sectors face a more substantial bearish pressure due to concerns regarding weight-loss drugs like Ozempic and Wegovy, manufactured by Novo Nordisk A/S (NVO  ).

These concerns revolve around the potential to alter consumption patterns and reduce people's inclination to consume high-calorie foods and beverages. Earlier this week, Walmart Inc. (WMT  ) reported a decline in shopping demand attributed to the use of weight-loss and appetite-suppressing drugs.

Novo Nordisk Drugs Could Push Down Food Market: Analyst

"The launch of new highly effective drugs (GLP-1 agonists) for obesity by Eli Lilly & Co. (LLY  ) and Novo Nordisk could be one of the biggest in the history of Biopharma," according to a Friday Bank of America note.

The team of analysts, led by Geoff Meacham, said the substantial weight loss observed with GLP-1s should drive strong demand. Yet GLP-1s also have downstream effects, such as reducing appetite and curbing cravings and addictive behaviors.

The market impact of these effects is less clear, but they could potentially reshape consumer behavior in the long term, benefiting some industries while posing higher risks to others, BofA said.

BofA analysts suggest the highest risk of reduced consumption due to the effects of weight-loss drugs pertains to alcohol, snacking in comparison to regular meals and non-alcoholic beverages. Additionally, weight management products (such as shakes and frozen meals) could also be at risk if their intended purpose becomes obsolete.

According to Bank of America, intermittent snacking may encounter more significant headwinds compared to meal occasions such as lunch and dinner, and, in this context, at-home consumption is likely more vulnerable than out-of-home consumption.

Food Stocks To Watch In The Ozempic Era

• The Hershey Company (HSY  )
• PepsiCo, Inc. (PEP  )
• Mondelez International, Inc. (MDLZ  )
• Bellring Brands, Inc. (BRBR  )
• Conagra Brands, Inc. (CAG  )
• Constellation Brands, Inc. (STZ  )
• Molson Coors Beverage Company (TAP  )
• Utz Brands, Inc. (UTZ  )
• Campbell Soup Company (CPB  )
• Kellanova (K  )
• The J.M. Smucker Company (SJM  )
• The Coca-Cola Company (KO  )
• Keurig Dr Pepper Inc. (KDP  )
• Brown-Forman Corporation (BF  )
• Nestlé A.G. (NSRGY  )

Excluding BellRing Brands, all of these stocks are trading lower this week and for the month. The poorest performer is the newly established Kellanova, which spun off from WK Kellogg Co. (KLG  ) and saw a significant 15% decline.

Notably, soft-drink industry giants like The Coca-Cola Company and PepsiCo both experienced a substantial 5% drop, marking their worst-performing week in over a year-and-a-half.