LONDON/NEW YORK - The growth in demand for appetite suppressing anti-obesity drugs like Novo Nordisk's Wegovy presents opportunities for food manufacturers and the market's initially downbeat reaction may be overdone, investors say.

When Walmart said this month that it saw a slight pullback in food consumption when people took the medication, it sparked a sell off in shares of companies including Nestle, the world's biggest packaged food maker.

"It feels like quite an overreaction," said Aviva portfolio manager Richard Saldanha. "People are extrapolating long-term consumer habits."

Wegovy has already proved a phenomenal success in the United States and is now being rolled out in some European markets including Norway, Denmark and Germany, prompting concerns in the consumer and retail industry that food sales may be impacted.

"Novo's breakthrough can definitely lead to major changes - both for food and beverage companies, but also for other health-related stocks within the obesity industry," said Kiran Aziz, head of responsible investments at Norway's biggest pension fund KLP, which holds stakes in both Novo Nordisk and a number of food companies.

She added, however, that more focus should be paid to the impact on supermarkets, where margins are thinner and the impact on profitability may be greater.

Nestle has already started work on products that "companion" weight loss drugs like Wegovy, CEO Mark Schneider said last week, which may include supplements to help compensate for the "loss of lean muscle mass" and "rapid regain of weight".

Those initiatives, and the limited availability of the drug as Novo struggles to keep up with demand, have persuaded some investors that the so-called "miracle drugs" will not hurt the industry in the long term.

The initial market reaction to the new class of weight-loss drugs is reminiscent of early hype over the metaverse, which has since flamed out as investors and companies realise that behaviour is slow to change, said Arda Ural, EY Americas Industry Markets Leader, Health Sciences and Wellness.

"The problem is that lower social economic groups have more obesity and risk factors, but the cost of taking these medications is a limiting factor," Ural said. "Making this affordable and starting to see the positive downstream impacts will be something that changes at glacial speed."

Still, the stock market impact left some food manufacturers "trembling," said John Plassard, senior investment specialist at Nestle investor Mirabaud Group.

"The companies most at risk could be those dedicated exclusively to 'junk food', or restaurant chains that don't offer much in the way of alternatives," he said.

Brian Frank, portfolio manager of the Frank Value fund, which has positions in Tyson Foods and Arcos Dorados, the largest McDonald's franchisee in the world, said he will look to build stakes in stocks that take a Wegovy-related hit.

"If the market is going to give me a discount I will happily take it," he said.

The uptake in appetite suppressing drugs seems to be a U.S.-led dynamic, said My Nguyen, research analyst at Legal & General Investment Management America. "Elsewhere, trends such as wealthier, more mobile middle classes in emerging countries can support shifts towards snacking and convenience foods."

A portfolio manager at Germany's Union Investments, which has stakes in Unilever and Coca Cola, sounded a more cautious note, saying the perception that weight loss drugs will be bad for the industry will be hard to break.

"Everybody assumes people will take these pills, get slim, and eat less," they said. "And companies cannot prove that this is not true."

(Reporting by Richa Naidu; Editing by Matt Scuffham, Kirsten Donovan)