AMBP - Weight loss drugs seen impacting container packaging companies

2023-10-10 14:19:53 ET

Concerns over the impact of weight loss drugs on the bottom line isn't limited to restaurants and food companies. Businesses involved in food and beverage containers and packaging could also get hit, according to Citi.

On Tuesday, the firm cut prices on North American container and package companies that have heavy exposure to food and beverage given the potential impact GLP-1 agonist drugs could have on many Americans' eating habits.

The firm is keeping its ratings on stocks in the sector. Out of nine companies it is covering, eight have buy ratings. Pactiv Evergreen ( PTVE ) is rated at hold.

Analyst Anthony Pettinari said that given the potential market for weight loss drugs, "further adoption of the GLP-1 drugs could be an existential problem for [consumer packaged goods]-exposed packagers.

He noted that in recent years, CPG companies have relied on snacks, takeout, and food service as growth drivers.

Pettinari added that if food and beverage volume take even a 1%-2% hit from the drug class, "it might represent half or more of packagers' trend vol growth."

Some popular GLP-1 drugs are Novo Nordisk's ( NVO ) Wegovy (semaglutide) and Eli Lilly's Mounjaro (tirzepatide).

Other companies have also noticed an impact from GLP-1 drugs. Earlier this month, Kellanova ( K ) said it was looking at challenges the meds could have on its business. Also, a Walmart ( WMT ) recently said that drugs such as Novo Nordisk's ( NVO ) Ozempic (semaglutide) are having an impact on food purchases.

Citi's North American package coverage includes the following stocks: Ardagh Metal Packaging ( AMBP ), Berry Global ( NYSE: BERY ), Crown Holdings ( CCK ), Graphic Packaging Holding ( NYSE: GPK ), O-I Glass ( OI ), Sealed Air ( NYSE: SEE ), Sligan Holdings ( SLGN ), Sonoco Products ( NYSE: SON ).

More on Packaging Companies

• Berry Global: Changes In Capital Allocation Gives Hope To Shareholders

• Sealed Air: Investments Is Off The Table For The Rest Of H2 2023

• Graphic Packaging: On Its Way To A 15% Free Cash Flow Yield In 2025

• Sonoco Products: Packaging Powerhouse With Promising Prospects

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