15-05-2019 · Insight

The key consumer trend of 2019: health and wellness

There is no denying that young consumers care about their health. This is reflected in a variety of choices – about diet, sports, wellness and leisure, work, travel and even clothing.

Millennials and Gen Z use fitness trackers and smart watches to track training data and health information. They are willing to spend more money on interesting sporting goods and athleisure brands, such as the running and cycling app Strava, Allbirds shoes, which are made from natural materials, or an Apple smartwatch, just to name a few. And they eat more natural and organic foods with healthier ingredients and fresh herbs and spices.

“For millennials, wellness is an ongoing commitment,” says Robeco portfolio manager Jack Neele. Particularly noteworthy is Gen Z’s attitude to consumption, which has become more like an expression of individual identity, and a matter of ethical concern.

The healthy consumer space is truly diverse with subthemes ranging from fitness to food ingredients. It also includes corporate wellness, beauty, sleep, personalized care, athletic apparel, personalized nutrition, travel and hospitality, and mental wellness.

Within this vast universe, the industry of healthy and organic food is growing the fastest. For example, low-calorie sweeteners and vegetable snacking are becoming increasingly popular. And the demand for plant-based protein, as can be found in meatless sushi and vegan takeaway meals, continues to gain momentum. Many large traditional packaged food companies invest in this space, such as General Mills (Beyond Meat), Nestle (Impossible Foods), and Unilever (De Vegetarische Slager).

The organic food industry has multiple drivers

The industry has a few underlying drivers, the most important one being the strong growth of small and local brands, particularly in emerging markets. The health and wellness trend also reinforces it as it drives the need for more high-quality ingredients. The rising demand for convenience is another contributing factor, whether it be for on-the-go meals or shorter average meal preparation time.

The healthy consumer trend as a whole is also driven by the internet, which has lowered the barriers to entering the market. This has happened in all areas of the business – manufacturing, branding and distribution.

The trend has also received a boost from startup proliferation, which has made possible new and innovative ways of producing food. The era of social media also has also given it a push, as platforms like Instagram & Snapchat have made it possible to target specific audiences with advertising. And finally, with the help of e-commerce and logistics, any firm can now deliver its products to the customer’s doorstep.

The organic food industry has multiple drivers

Any firm now can deliver its products to the customer’s doorstep

Consumer Trends

Consumers appetites are changing, your portfolio should too
Discover more View all themes


Traditional packaged food companies are under pressure

These days, young consumers eat healthy and rely on the internet to find the healthiest foods. As a result, the producers of traditional packaged and processed food are finding they have to reinvent themselves, as merchants offering fresh and organic foods, meal delivery services and online grocery business models do a better job catering to millennials’ demands.

Moreover, the advancement of internet and e-commerce have lowered barriers to market entry for startups in this area. “It has never been easier to launch a brand and advertise it on networks like Instagram,” says Neele. All these factors have disrupted traditional food producers. “For years, they have been focused on efficient manufacturing and lowering prices often at the expense of quality and health characteristics,” says Neele.

Yet, consumers are now much better educated and are choosing different brands and products. So it comes as no surprise that the returns of most of the US-based traditional packaged food producers have been falling compared to the S&P 500 Index since at least 2017. Many of these companies are aiming to pivot their portfolios through acquisitions.

image.png

Source: Robeco Trends Investing

What are the implications for investors?

Investors can benefit greatly from having an understanding of the healthy consumer universe. The structural winners in this trend could either be new entrants which are able to benefit from it, or traditional food producers with a well-rounded product portfolio. This trend was one of the key themes covered at a media roundtable on Trends Investing organized by Robeco in Amsterdam last month.

“We believe that within the space, the specialty ingredients market is seeing significant growth and presents an important investment opportunity,” says Neele. The production of the enzymes necessary for making probiotic yoghurt is just one example. The specialty ingredients market is currently worth around USD 75 billion and is still in its infancy compared to the large packaged food industry. But it is growing faster and faster, and delivering high margins and returns.

Let's keep the conversation going

Keep track of fast-moving events in sustainable and quantitative investing, trends and credits with our newsletters.

Stay updated
Robeco

Robeco aims to enable its clients to achieve their financial and sustainability goals by providing superior investment returns and solutions.

Important information This disclaimer applies to any documents and the verbal or written comments of any person in presentations or webinars on this website and taken together is referred to herein as the “Information”. The services to which the Information relate are NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws and must not be relied or acted upon by any other persons. This Information does not constitute an offer to sell, or a solicitation of an offer to buy, any financial product, and may not be relied upon in connection with the purchase or sale of any financial product. You are cautioned against using this Information as the basis for making a decision to purchase any financial product. To the extent that you rely on the Information in connection with any investment decision, you do so at your own risk. The Information does not purport to be complete on any topic addressed. The Information may contain data or analysis prepared by third parties and no representation or warranty about the accuracy of such data or analysis is provided.
In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management UK Limited (“RIAM UK”) is authorised and regulated by the Financial Conduct Authority. RIAM UK, 30 Fenchurch Street, Part Level 8, London EC3M 3BD (FCA Reference No:1007814). The company is registered in England and Wales under Ref No. 15362605.

In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management B.V. is authorised as a manager of UCITS and AIFs by the Netherlands Authority for the Financial Markets and subject to limited regulation in the UK by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.