Investing in health and wellness

  • Investment management
  • 5 minute read
In our Socially Responsible Investment service we are looking for sustainable investments that both promote healthier life styles and simultaneously benefit from this trend. It began in earnest with “athleisure” wear. At some point around 2015, meeting your friends in your workout clothes shifted from a sign that you had let yourself go to a new form of virtue signalling. A symbol that you were the sort of person that goes to the gym, gets enough sleep and eats healthily.

While health and wellness is not a new trend, it is one that has grown with astonishing ferocity in recent years. Social media has played a large role in driving this, not least with regards to health food, with everyone from influencers and chefs to the average foodie posting endless pictures of meals as nutritionally virtuous as they are elegantly constructed. It is no surprise that 47% of UK 18-34 year olds surveyed in 2016 said they were changing their eating habits to eat more healthily [1]. The organic food market is taking off, with average compound annual sales growth above the average for the overall food manufacturing sector.

While this very cohort of consumers may frequently be on the receiving end of the nation’s collective scorn, this change is not before time. Nutritional health issues are estimated to result in a global economic cost of $3.5bn per year, in the form of reduced productivity in the workplace and direct healthcare costs. In the UK, the issues such as obesity and malnourishment are getting worse. Around 27% of the UK population are now clinically obese, and another 36% are overweight, despite intervention from government and even celebrity chefs. This makes the UK the most overweight nation in Western Europe! [2]  As the introduction of the Government sugar tax demonstrates, there is a growing recognition amongst policy makers that this problem needs to be addressed.

Health, including health foods, is now big business, and companies are responding to the opportunity. 30% of all food companies are now invested in healthy foods in one way or another [3]. The big food giants such as Nestle, Hershey, Danone, and Coca-Cola have been investing in healthier foods and ingredients, and at substantial multiples.

Already in 2018, Nestle acquired Atrium Innovations, a nutritional health products company for US$2.3bn and Hershey bought Amplify Snack Brands, a healthy snack manufacturer for US$1.6bn. These large companies have also set targets to address health issues. Nestle aims to reduce sugar content in products by 5% from 2020 onwards; Coca Cola has invested £15m in product development for lower sugar alternatives; Mondelez is set to reduce saturated fat and sodium in their products by 10% from 2020 onwards; and PepsiCo’s goal is to have two thirds of their beverages with less than 100 calories per 12-oz by 2025 [4].

While these developments are no doubt positive for consumer choice, the fact that there are few large companies that specialise in the area poses a challenge to investors seeking a pure-play investment in this theme.

There are companies such as Netherlands-listed Wessanen, which focus solely on the manufacture of organic food. Wessanen both promotes and benefits from the drive for healthier living and has positioned itself as a leader in a market that is conservatively forecasted to grow at 6% per year which, at more than twice as fast as GDP, makes it an attractive investment opportunity.

Wessanen stands out with a portfolio of leading brands in its core regions and segments. Not only does Wessanen promote positive healthy lifestyles with its product suite, but the company also sets an example, as it has strong positive core values around environmental protection, social empowerment, and governance embedded in its corporate DNA. We invested in Wessanen for its attractive market positioning and growth, as well as its compelling EBIT margin expansion story as the company builds scale. We also recognise its maturing brands, M&A set to further returns, strong values rooted in ESG (environmental, social, governance), and alignment with the UN Sustainable Development Goals. This is just one example of virtue signalling - but through investments.

Remember, the value of investments can go down as well as up and you may get back less than you originally invested. The contents of this post is provided by Close Asset Management Limited for information purposes only, does not constitute financial advice and should not be relied upon for the purposes of any investment decisions. In particular, this post does not constitute a recommendation or advice regarding the shares or other securities of any issuer.

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[1] Citi Research, Freedom Foods Group Limited, “A healthy disruptor”.  Sam Teeger, CFA, Ross Barrows, Siraj Ahmed, Supratim Datta. 10 April 2018.

[2]  https://www.independent.co.uk/news/health/uk-obesity-rate-rising-overweight-worst-country-western-europe-world-us-ranking-oecd-research-a8049451.html

[3]  https://upfluence.com/influencer-marketing/influencer-marketing-healthy-food-industry

[4] Citi Research, Freedom Foods Group Limited, “A healthy disruptor”.  Sam Teeger, CFA, Ross Barrows, Siraj Ahmed, Supratim Datta. 10 April 2018. Data from company websites.

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