Pharmacist take:

GLP-1 drugs are first line now in the fight against diabetes with metformin. They work incredibly well to reduce A1C and the data for weight loss is equally/more impressive. We counsel people who start new GLP-1 drugs to eat half of what they normally eat portion wise for every meal to avoid nausea/vomiting. Greasy foods can also trigger this side effect. Once major insurance plans start covering glp-1 drugs for WEIGHT LOSS instead of just DIABETES, this restaurant short thesis could really take effect by doubling or tripling the number of patients on these drugs. Then we should start seeing a significant reduction in food consumption.

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The average in that set is basically meaningless: without WING the average PE is 25.6 (not great, not that outlandish) and the average EV/EBITDA is 17.6 (setting aside that averaging ratios is somewhat innumerate anyway). I'm short WING.

Fast food and delivery are going to be challenged by GLP-1: those models are fundamentally about calorie delivery. But sit-down will more likely be OK, as selling calories is a small part of that bundle: what's really being sold is a lease on a table or spot at the bar to socialize. The lease is now mostly monetized with alcohol (the GLP-1 impact on that demand seems under covered), but bundle monetization can shift: tapas and expensive sparkling water?

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I don’t think people are going to go to less sit down restaurants because of GLP-1’s. You don’t go because of a craving.

Still going to be such a small portion of the population for so many years, I don’t think it will be material, BUT if I had to place my bet it’d be on Delivery companies being exposed. Uber eats / door dash are the pinnacle of marginal demand and unnecessary eating. CMG is a legitimate meal, people won’t necessarily skip

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Our “common heritage”. Never forget that you belong to an economy that allows wealthy people, enjoying first class freedoms, to invest in companies that repeatedly misuse our science, our tax dollars, our highway and healthcare systems, even our sunlight, water, plants, and soils while exploiting our labor, too, all of this only to help sweeten, for instance, a highly addictive drug and package it the into a small, stylish container, then give it a cool name like “Tyson 2.0 Heavy Weight 7000 Puff disposable vape pod system from Mike Tyson” to better guarantee their tobacco industry a new generation of young people dependent on useless products, smoking nicotine every day for the rest of their shortened, lung-crusted lives.

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Most commenting seem to be missing the point the the drugs fundamentally change the psychology around eating / addictive behaviors. There is no reversion to eating unhealthily because the drugs change your desire to eat these sorts of foods.

MDLZ seems like a better pure play short; agree with those who say in person dining captures value outside of just pure calorie delivery.

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I think PEP and KO are the better shorts. Restaurants have levers around portion size and pricing, but soda is just addictive sugar water, and a big chunk of revenue is from obese power users who should be lining up for GP1s.

Alcohol companies could also see a headwind, but that’s a lot more speculative.

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People on GLP-1 agonists not only eat less, but they enjoy eating less--one of the main reasons people go off of them is anhedonia, and presumably in general people on these drugs will be less interested in eating out even as a treat. I don't know how big a share of the population may end up on these drugs, but if it is substantial I would think it would affect restaurant sales adversely.

Note that the drugs also seem to reduce other addictive behaviors, so it might also be a headwind for gambling, tobacco, and marijuana companies. But the magnitudes of all these effects are entirely speculative at this point.

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I appreciate the article, as always. Here are some potential counterpoints:

- The psychology of, I'm losing weight so I can eat more without a negative impact.

- restaurants move to offering smaller portions, increasing margins.

- when people are concerned about eating better, that doesn't necessarily mean they eat out less, but it alters the choice of where they eat.

- to the point above, how much can people alter their choices around eating out anyway? In some places you are simply talking about the cost differential, but in many locations the alternatives are lacking so maybe you go to cmg anyway.

- further on going to cmg anyway... Now you order a side of avocado, which is pricy (another potential point of margin increase).

I have no view one way or the other on your thesis, but I suspect the second order effects are resistant to modeling.

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Sep 3, 2023·edited Sep 3, 2023

The other area to consider is booze - GP1 reduces addictive behaviour and as capacity for food declines likely so does volume of drink

The other restaurant short angle to consider is services like Factor - in the U.K. you've had high quality chilled ready meals for ages and very popular - Tesco tried to bring to the US and failed but Factor is now getting good traction. Given price increases in restaurants Factor is now decently cheaper than even most takeouts and gets excellent reviews - in part it's a trade on efficiency and high labour rates

The other potential short would be the delivery companies less demand for takeouts due to both GP1 reduced intake and Factor replacement

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Lots of ways to look at this. I agree that a thinner, healthier population might be more likely to eat out as a treat. Also, don’t forget that these restaurants will have a margin tailwind as they increasingly use technology to cut costs in preparing food and taking orders.

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I was thinking the same thing. The demographic who eats at McDonalds or Taco Bell is different from the demographic who can afford a fancy ($$) weight loss drug.

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