Buyers are valuing food brands most vulnerable to obesity drugs well below functional nutrition peers, a gap that has widened as lenders and acquirers shifted from footnoting the risk to modeling it directly.

Deals at the weaker end are getting done at around 9x–10x EBITDA, against the mid-teens for advantaged categories, said Uk-Sun Kim, head of credit originations for middle market and sponsor finance at TD Bank US. Sellers on the wrong side of that line are not finding buyers absent, only cheaper – earnouts and structured consideration are closing the difference.

The spread is wide enough to change what sponsors will pay at entry. Private equity firms are doing hold-period math, Kim said: “A five-year exit means underwriting the terminal multiple, not just cash flows, so sponsors demand a steep entry discount, rotate to the beneficiaries – fitness, aesthetics, protein – or pick up carve-outs at the right basis.”

Strategic acquirers have moved harder and faster, said Peter Mangan, managing director at Portage Point Partners. Danone agreed in March to buy UK meal-replacement brand Huel, a deal the competition regulator cleared last week. In June it agreed to acquire Melbourne-based MADE Group from TPG Capital, adding high-protein ready-to-drink beverages and gut-health yogurts across Australia, New Zealand, and Southeast Asia.

Terms were not disclosed on either transaction; press accounts put Huel at roughly USD 1.2bn and MADE at about AUD 2bn. Mangan described the deals as bold moves by a large strategic positioning against a changed environment.

Sponsors are not sitting idle, either. L Catterton agreed in January to a majority investment in cottage cheese maker Good Culture, valuing the business at more than USD 500m according to press reports, with existing backer Manna Tree reinvesting. In June, CapVest-backed Second Nature Brands agreed to buy meat-snack producer Tillamook Country Smoker, which carries more than USD 175m in sales, from Insignia Capital Group; the deal closed this month for undisclosed terms.

Below the label

“As consumers on GLP-1s reduce their caloric intake, they seek to maximize the benefits of what they do consume, while also stretching their dollars, given inflationary pressures,” said John LeVert, managing director of consumer retail at investment bank Solomon Partners. That has favored Greek yogurt, cottage cheese, fresh produce, meat snacks, protein bars, and bone broths – categories delivering high protein and nutrient density per calorie – and disfavored salty snacks, cookies, and frozen meals, he said.

Mangan puts indulgent snacking, sweet baked goods, soft drinks, and anything competing on calorie volume rather than nutrient density on the exposed side. Kim adds alcohol and identifies impulse-driven purchases as where users cut hardest.

But category may be the wrong unit of analysis. The sharpest line does not appear to sit between categories at all, Kim said. A brand that does not own its manufacturing plants can change its formula, portion size, and price.

A brand with outsourced manufacturing can follow demand; a business with capital sunk into a single shrinking line cannot, and the multiple reflects it. Kim said, “A heavy manufacturing footprint dedicated to a declining category is where the real risk sits for owners and buyers.”

Credit committees weigh in

Underwriters now run explicit stress cases on category volumes, according to TD Bank’s Kim.

“Two years ago, GLP-1 was a modest paragraph of risk-factor boilerplate; today, virtually every food, beverage, and wellness deal that crosses our desk has a dedicated GLP-1 workstream,” Kim said.

Roughly one in five US households includes a user, he added, and adopting households cut grocery spending about 5% within six months, concentrated in a handful of aisles.

Lenders are emphasizing the downside case over management’s, Kim said, which means less leverage and potentially wider pricing on exposed credits, tighter documentation, and a premium for category and channel diversification. Single-brand, single-category stories draw the most scrutiny.

The shift is visible on the sell side. Marketing materials often contain a dedicated positioning slide on the drugs, Mangan said, “and buy-side teams are underwriting category-level volume trends, not just topline growth.”

Mangan added, though, that the trend is moving prices, not stopping deals. Of the consumer processes that did not reach a close this year, the gap between buyer and seller was driven more by business quality and financial performance measured against the current valuation environment than by drug exposure.

Dining rooms remain busy

The pattern breaks at the restaurant door. People are not eating out less. They are eating at fewer places, sticking with their favorites.

“Honestly, we’re not seeing a material change in the industry yet,” said Joe Yetter, president of restaurants at hospitality software provider PAR Technology. Transactions and same-store sales are still growing across brands and multi-unit operators, though results have become uneven. “The brands guests really love are performing just as well, if not better, and the brands guests would only occasionally visit are seeing a real drop-off.”

The public numbers show the divergence. Burger King posted 8.5% US same-store sales growth in the second quarter while McDonald’s managed 0.8% and Popeyes fell 5.2%. Across roughly 30,000 restaurants in PAR’s operational index, Yetter said, that reads as reallocation between brands rather than an overall pullback in visits. Guests are cutting the trip to their third or fourth favorite while protecting the first.

What separates the strong performers from the rest predates the drugs. Menus have barely moved, Yetter said. Some brands have added protein-forward items aimed at users, but the broader reset has not arrived. Where operators are stuck, the causes are older ones: stores that have not been remodeled, food quality that has not been reinvested in, and menu architecture that has taken price until no everyday value remains.

“I believe the principles of a successful restaurant brand haven’t changed. It’s just gotten harder to execute on them,” Yetter said. “The trend is real, but it’s landing on top of an execution gap that already existed.”

The space in between

Public market investors and buyers are overplaying both extremes, the sources said.

Treating every indulgence category as terminal ignores adherence, Kim said. About half of users stop within a year, many cycle back on, and consumption partly rebounds in between. The opposite error is assuming the constraint on adoption holds. Oral formulations now start near USD 150 a month, and Medicare began covering weight-loss drugs for the first time on 1 July under a demonstration program capping copays at USD 50 – removing the affordability ceiling that paced uptake.

The more common mistake is treating whole categories as uniformly exposed, Mangan said. They are being disrupted and reinvented at the same time, through reformulation and repositioning around a brand’s existing strengths.

Intersnack’s agreement in July to take Utz Brands private at an enterprise value of about USD 2.9bn is the clearest bet against the consensus. The USD 14.25 per share offer represented a 91% premium to the previous day’s close, on a stock that had fallen from more than USD 27 in 2021 to under USD 7 in June. The founding Rice and Lissette family will retain half the company alongside Intersnack.

That rollover is the structure Kim expects to see more of.

“The most interesting bidder today is patient family and private capital,” he said, “which can hold exposed but cash-generative assets through the cycle without a public multiple marking the thesis every quarter.”