The Rundown - Deep Dive: How Junk Food Giants Are Battling GLP-1s & RFK Jr.’s Health Crusade

Episode Date: March 16, 2025

The junk food industry is facing a major shake-up as consumer habits shift, weight-loss drugs like Ozempic gain traction, and government intervention ramps up. From declining snack sales at PepsiCo and Mondelez to Robert F. Kennedy Jr.’s crackdown on artificial additives and junk food subsidies, the pressure is mounting on Big Snack. But the industry isn’t going down without a fight—companies like Pepsi and Coca-Cola are acquiring health-conscious brands, investing in prebiotic sodas, and embracing portion control strategies. While the golden age of junk food may be fading, the business of junk food is evolving to keep profits intact.The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for another weekend deep dive. Today we are talking about the threats against the snack and food industry from Coca-Cola all the way to Doritos. The snack and soda industry is getting hit by changing consumer habits, weight loss drugs, and even government intervention. So today we're going to take a look at the state of the junk food industry and how these food giants are fighting back against the challenges. And we're going to answer the question, have we actually hit peak junk food? We got a lot to munch on today. Let's get into it. Junk food and snack companies are going through a rough pass right now. In recent earning calls, snack giants like PepsiCo, which owns brands like Doritos, Lays, and Cheetos, have pointed to a shift

and consumer behavior. Mondalese, the company behind Oreos and Chips Ahoy, is also saying the same thing. It looks like consumers might be starting to skip the snack aisle. PepsiCo's snack business saw sales volume fall by 3% in the company's most recent quarter, making that the fifth consecutive volume decline. Mondalies also recorded a 1% volume. drop across all its food business in 2024, and now they're too scared to even give volume growth projections for North America. So that's probably not a great sign. So according to those numbers, it looks like people are buying less snacks like Oreos, Doritos, Lays, chips a whole, and all the classic stuff you'd find in a pantry, people just aren't buying anymore. I mean,

even myself, as a kid growing up, I used to eat that stuff all the time. But these days, I try to stay away from that stuff, and I try to limit it with my kids as well. Now, one thing that might be contributing to the changing consumer behavior is the rise of weight loss drugs like GLP-1s. Drugs like OZempeg, Wegovi, and Zep-Bahn have become household names at this point, and millions of Americans are on them these days. And according to a study by Morgan Stanley, GLP-1 patients have already shown signs of slowing down their food spending habits. This report shows that half of weight-loss drug users cut their soda and snack consumption by 50%. I mean, that's pretty significant. Now, PepsiCo and Mondalese are downplaying the impact that these

drugs are having on their business. At the start of last year, Mondali says they expect their U.S. sales volume to decline between 0.5 to 1% until 2035 because of weight loss drug adoption. So they don't think it's going to be a huge impact on their business. In fact, they think that only 7 to 14% of the U.S. population will take these weight loss drugs. But I mean, as of 2023, 40% of American adults were considered obese. So if GLP1 drug adoption goes higher than expected, I mean, these food companies might have some serious problems. And that's why Morgan Stanley expects consumption of chips, soda, and cookies to decline by 4 to 5% by 2035. Now, that might not sound like a lot, but when you're talking about a multi-billion dollar industry, that's a lot of lost revenue.

And that's not the only challenges these snack companies are facing. They now have to worry about the U.S. government. Junk food companies right now have a full plate of challenges, no pun intended. They're dealing with changing consumer behavior. through dealing with the rise of GLP-1s, but now they also have to deal with RFK Jr. and a more health-conscious government. Robert F. Kennedy Jr. was just sworn in as Trump's Secretary of Health and Human Services,

meaning he's now overseeing agencies like the FDA. And RFK has made it very clear he's coming for processed foods. He's been vocal about finding the processed junk food industry, claiming that much of the country's health problems are derived from the type of food we have access to. Now, the FDA is already starting to make some moves. Shortly before RFK Jr.'s Senate approval, the FDA banned Red Die No. 3 from use in foods, as research had found it caused cancer in rats. Why was this thing even allowed?

RFK, not a big fan of Red Die No. 3 or any sort of artificial dyes. In fact, he recently met with executives from PepsiCo, General Mills, and Kellogg's, warning them that he wants all artificial dyes removed from food products by the end of his term. And he said that these companies don't play ball. he's ready to push through government bans. And that's not all. RFK is also working to block food stamp dollars from being spent on junk food.

See, right now, soda is the number one item purchased through the Supplemental Nutrition Assistance Program, also called SNAP. So if people on SNAP can't buy soda anymore, that's going to be bad news for Pepsi and Coca-Cola sales. Now, the irony of all of this is that RFK's boss, President Trump, reportedly drinks like five Diet Cokes a day. Now, I'm just scratching the surface

and all the moves that RFK wants to make. He's working to change dietary guidelines as well, which impacts the types of foods that can be served under government influence organizations, such as schools and military sites. I don't know about you, but when I was growing up, there was a lot of chips and soda in schools back in the day. So that's probably going to hurt the junk food companies as well. RFK is also going after other chemical additives to foods. The health secretary wants to take on a set of food rules called generally recognized as safe, or GRAS. The current GRAS rule system allows companies to identify what is considered safe for food additives without notifying the FDA. RFK wants this change so food additives can be better governed.

And finally, RFK wants to make junk food more expensive by cutting subsidies to ingredients like soybeans and corn used to make high fructose corn syrup and other junk additives. So RFK has a big agenda and we'll see how much he gets done during his time as secretary. It might be a tough four years for these snack companies, but some of them are already making moves to fight back. Big snack companies know the writing's on the wall. They can't keep selling the same stuff forever. So they're already pivoting. Pepsi, for example, is buying their way into the healthy food market.

They recently bought the remaining 50% of Sabra hummus for $240 million. Then to kick off 2025, they acquired Siette Foods. It's like a Whole Food-style brand known for using clean ingredients, and they paid $1.2 billion for that company. So now Pepsi owns both Tostitos and Ciette, which means either way, they're going to win. Whether you're eating Doritos, Tostitos, or a fancy organic tortilla chip. That revenue is going to Pepsi's going to Pepsi. Pepsi is also getting into the healthy drink business.

Pepsi started off by trying to launch their own healthy soda brand called Soul Boost. But now they're reportedly in talks to buy Poppy for over $1.5 billion, according to Bloomberg. That would be a huge pickup. I wonder how the Poppyheads feel about that. I need to ask my wife. Now, Pepsi is not the only one making moves. Coca-Cola launched a prebiotic soda called Simply Pop last month to compete with Ali-pop and Poppy.

I mean, Ali-pop has been blowing up recently. Their sales have grown 2,000% in three years ending in 2023. Coke saw that growth, and they want some of that action. And Coke has also made a big bet on drinks beyond just soda. Coca-Cola's acquisition of Fair Life, which is a protein milk, has been very successful. In fact, it's quietly become one of Coke's biggest growth drivers. Fairlife sales hit $1 billion in 2022, up more than a thousand percent since 2015. And a lot of that growth might be coming because of the weight loss drug boom.

That's because weight loss drug patients are told to eat high protein diets. So Fair Life has been a great acquisition for Coca-Cola. I mean, they've paid north of $7 billion for it at this point because Coke agreed to a performance-based compensation as part of Fair Life's acquisition deal. But it's just crazy to think that a milk company has become Coke's largest acquisition. in their history. I mean, Coke is over 133 years old. Now, top it all off, companies like Pepsi and Mondalese are also making portion control adjustments. They're essentially shrinking snack sizes and pitching it as a way to cut calories, even though it lets them charge the same price for less product. It's like shrinkflation, but this time on purpose and with better marketing. At the end of the

day, junk food companies realize they need to evolve. Some are actually embracing health. Others are cutting portion sizes, either way, they're trying to keep their profits intact. Whether this works long-term, let's still up for debate. Now look, junk food isn't going away entirely. There's always going to be demand for Oreos, Doritos, and soda. Like even me, no matter how healthy I try to become, I'm probably still going to drink a soda with my pizza, eat chips and candy. I might skip the double-stuffed Oreos, but I'm still going to have my junk food. But there's no denying it. Consumers are buying less snacks, add in the popularity of weight loss drugs and government. pressure, the golden age of junk food might be over. Companies see that and they're already

shifting their strategies by buying healthier brands, launching better-for-you versions of their products, and finding whatever way they can to keep their margins high. Maybe the golden era of junk food is ending, but the business of junk food, I think it's still here to stay. Plus, in like five years, all these healthy alternatives might be considered junk too. Well, all right, guys, that's it for today's deep dive. Hope you guys enjoyed today's episode. If you did and you have like six extra or seconds, consider giving us a five-star rating on Apple or Spotify. Also, check us out on YouTube if you haven't already. We post these deep dive episodes with video.

The videos have nice charts and graphs that you might find useful. So definitely go check that out. You can watch the video version of his podcast on YouTube and Spotify. And while you're there, don't forget to leave us a comment on Spotify or YouTube to tell us what topics you want us to cover in future deep dive episodes. Thank you guys so much for listening. Shout out to Mike and Connor for all the help. behind the scenes and we'll see you guys back here on Monday.