The world's population has become heavier in the last 35 years. More than 1.9 billion adults were overweight in 2014, and a third of these were obese, according to the World Health Organization (WHO). WHO predicts that the number of overweight and obese children under the age of five will rise from about 42 million in 2013 to 70 million by 2025.
In a 2014 study, McKinsey Global Institute assessed the current impact to society of 14 major problems caused by humans (see chart). According to this assessment, obesity is one of the top three global social burdens caused by human beings. McKinsey’s findings suggest that every year, obesity costs the world $2 trillion and is a cause of 5% of deaths. McKinsey’s estimate of the economic toll of obesity includes the cost of lost economic productivity through the loss of productive life years, direct costs to health-care systems and the investment costs needed to mitigate the impact of obesity.
The food industry is adding more and more sugar to food, which consumers are largely unaware of, as it is mostly hidden. Products as diverse as flavoured water, sausages, mayonnaise, and even bread all contain sugar to make them more palatable and increase shelf life. Sugar has no nutritional value, gives no feeling of fullness and is acknowledged to be a major factor in causing obesity and diabetes. Robert Lustig, an American paediatric endocrinologist at the University of California, also called “Dr. Sugar”, argues that fructose (too much) and fibre (not enough) appear to be cornerstones of the obesity epidemic. He also points out that 20% of obese people actually have perfectly normal metabolic functioning, while instead 40% of normal-weight people are at risk as they suffer from metabolic dysfunctioning without knowing it.
How do we play this theme?
Obesity can be prevented, but it is a global phenomenon that will not easily disappear. Governments around the world are actively fighting to reduce the direct and indirect costs of obesity, using weapons that range from taxes on unhealthy products to subsidies for programs in areas such as medicine development.
Raising awareness of healthy eating patterns is also a key tool in government programs. Many public health organizations are pushing for more stringent measures in food labelling and marketing to children and for a stronger food reformulation program that targets unhealthy ingredients like sugar, fat and salt. In the private sector, an increasing number of corporates are proactively promoting healthy living.
The battle against obesity and the growing public awareness of the benefits of healthier lifestyles create multiple opportunities for investors. These opportunities may be found, for example, in the areas of healthcare, biotech and consumer-related industries such as food, general health and fitness.
The worldwide medical device industry is investing heavily in research and development related to diabetes and obesity. Direct investment is going into creating an artificial pancreas, which will help patients move away from insulin injections, as well as into gastric bands, which help patients eat less. Indirect investment is going into medical devices that target cardiovascular disease, which may be a function of obesity.
In the food and beverage industry, growth expectations for natural and organic food and drinks are quite high, given these products’ favourable perception and the high retail margins they deliver. In other consumer markets, stocks with exposure to themes such as fitness, physical activity and sportswear will be well-placed to benefit from the growing number of people engaging in sports.
In addition to assessing the most promising and most responsible investment opportunities offered by current trends, NN Investment Partners also actively engages with companies across different sectors to direct them to areas such as healthy living.
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