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Pepsi hurt by GLP-1 adoption

Andy Swan

16 Jul 2025 — 3 min read

PepsiCo Faces Pressure as GLP-1 Drugs Shift Consumer Preferences

PepsiCo (PEP) is confronting a challenging landscape as its Q2 earnings report is set to drop this week. The company is projected to see a 0.5% decline in revenue year-over-year, settling at $22.4 billion, continuing the negative trend from the previous quarter's 1.8% drop. The consensus for earnings per share (EPS) is $2.04, a notable decrease of 10.5% compared to last year. This slump is largely attributed to the increasing adoption of GLP-1 weight-loss drugs, such as Ozempic and Wegovy, which are reshaping consumer demand away from sugary beverages and snacks. PepsiCo's stock has underperformed the broader market over recent quarters, and sentiment has waned, with analyst ratings slipping from Hold to Sell. The anticipated decline underscores a broader slowdown as PepsiCo struggles to adapt to evolving health trends and declining near-term momentum. A visual representation of declining consumer interest in sugary snacks, with arrows pointing downward from soda cans and chip bags, symbolizing the impact of GLP-1 drugs.

The rise of GLP-1 drugs is altering consumer habits, posing a direct threat to PepsiCo's core products.

GLP-1 Drugs Change America’s Snack Habits

These drugs suppress appetite and reduce cravings, particularly for soda and snack foods, which are vital segments for Pepsi. In North America, categories such as soda and salty snacks are beginning to contract, with demand swiftly moving toward low or zero-calorie options. PepsiCo's strong presence in "fun foods," once considered an asset, now turns into a liability. With over 10 million active U.S. prescriptions for GLP-1 drugs, the impact is tangible. Market data reveals low single-digit contractions in salty snack and sugary beverage sales, especially in states with high GLP-1 usage. Pepsi's signature products like Pepsi and Mountain Dew, along with its legacy snacks like Lay's and Doritos, contribute significantly to its revenue, yet face headwinds from consumer shifts towards health-driven choices. As PepsiCo gears up to release its Q2 earnings, both top and bottom lines are expected to show contraction, highlighting an unfavorable risk/reward scenario. With EPS estimated between $2.03 and $2.04 and revenue forecasted between $22.3 and $22.4 billion, the outlook is grim. Recent quarters have seen downward revisions, and the likelihood of a downside surprise is high.

Earnings Preview

Despite trading at around 20 times its trailing EPS, PepsiCo's valuation appears stretched against peers, especially given the new demand headwinds. The company's trajectory is currently defined by momentum rather than a return to growth, with little room for optimism. Recent product launches haven't managed to offset the category weakness driven by GLP-1 trends, leaving investors skeptical about near-term recovery. An image depicting a tug-of-war between traditional snack brands and health-focused alternatives, with GLP-1 medication symbolically influencing the balance.

The challenges posed by GLP-1 drugs are not temporary but represent a significant long-term hurdle for PepsiCo.

Why the GLP-1 Headwind Is Structural, Not Cyclical

The appetite-suppressing effects of these drugs are expected to continue as their adoption grows. This has disrupted traditional brand loyalty as consumers increasingly focus on health. PepsiCo's product innovation has lagged behind these health-oriented trends, and its reliance on legacy demand is proving to be a vulnerability. As GLP-1 use is projected to more than double in the U.S. over the next two years, the pressure on volumes will persist. The rise of health and wellness trends is reducing the share of convenience foods in consumer baskets, eroding PepsiCo's brand stickiness. While competitors are advancing with healthier offerings, PepsiCo's strategy lacks a clear health-centric focus, emphasizing sustainability without adequately addressing health-first demands. For investors, the current risk/reward profile of PepsiCo does not justify exposure. As EPS and revenue continue to contract and GLP-1 adoption intensifies, valuation risks loom if multiples compress. With no credible catalysts for a turnaround, investors should consider reducing exposure ahead of the Q2 earnings release to mitigate potential downside.