The heavy cost of obesity

How to help keep your body—and portfolio—healthy.

23 Sep 2019

Key takeaways

  • There are more than 1.9 billion adults who are overweight, of which 650 million are obese.
  • The total estimated economic cost of obesity-related conditions are nearly 3% of the global GDP.
  • Companies are growing more proactive in responding to this epidemic.

Fat is good, just make sure it is the "good" kind. Don’t count your calories, just lower your carbs and eliminate sugar. Actually, it doesn’t matter what you eat, so long as you burn more than you take in. Blast fat with high intensity interval training, though you aren’t really working out unless you are lifting heavy weights three times a week. The rules of good nutrition and exercise keep evolving and changing making it harder and harder to stay on the treadmill and keep up.

It may seem that there is a new headline every day telling us how to eat and stay fit. Blame it on the staggering statistics on obesity. According to the World Health Organization (WHO), in 2016, there were more than 1.9 billion adults who were overweight, of which 650 million were obese. The Center for Disease Control and Prevention (CDC) estimates that nearly 40% of US adults, or 93 million, are obese.

While obesity is mostly a developed- world problem, the emerging world is expected to account for most of the increase in obesity numbers in the next two decades, according to the UBS Chief Investment Office (CIO), due to rapid urbanization and rising incomes. "Almost 70% of the world’s population will live in cities by 2050, according to UN estimates, and the urban lifestyle contributes to both of the primary causes of obesity: a more sedentary lifestyle and a more “Western” diet that includes higher amounts of fat, sugar and protein," says CIO analysts Lachlan Towart and Andreas Tomaschett.

Obesity is not just a health issue, but an economic one as well. A 2014 McKinsey study estimated the total economic cost of obesity-related conditions at nearly 3% of global GDP, including lost productivity due to disability or death.

While governments have explored ways to regulate sugar and fat, they have not been effective in reversing the obesity trend. But companies in the food and beverage, fitness and sports wear industries are growing more proactive in responding to the epidemic.

"Food producers and retailers need to be and are becoming a part of the solution in the fight against obesity," says the analysts. They are starting to expand into healthier categories such as fresh and organic food, are reformulating the nutritional profile of food by reducing fat and sodium content and are disclosing more information about ingredients in packaged food.

The beverage industry is also responding to concerns that tie sugar to obesity. Companies are watering down children's juice boxes as parents grow more anxious about their high sugar content, according to a report by the Wall Street Journal. Some are trying to use more natural sweeteners instead of artificial ones.

"In our view, lower sugar consumption in beverages should reduce obesity and benefit companies focused on low-calorie or natural/ organic drinks," says Towart and Tomaschett.

Another beneficiary from the battle against obesity is the sportswear industry, as increasing health awareness is likely to increase demand for fitness apparel and equipment.

CIO recommends investing in a diversified portfolio across the consumer and healthcare industries to participate in opportunities arising from the fight against obesity. "We expect the market opportunities for companies targeting the prevention and treatment of obesity to continue growing above GDP for an extended time. This should provide a lasting opportunity for companies exposed to the theme to achieve above-market earnings growth rates and returns on capital, on average," according to CIO.

Obesity is a Longer Term Investment theme. For more, read Obesity (PDF), 28 August 2019


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