Investing in health and disease prevention is the best cure

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COVID-19 might have put the spotlight on health, but our investment and active ownership teams have had a focus on health, healthcare and healthy food for some years already. We take the good aspects of it, such as the excellent investment opportunities that can be found in disease prevention, pharmaceuticals, fitness, and healthy and plant-based food, with the bad things. For this we are engaging with companies to create new health models that can drive down costs, produce food with less fat, sugar and salt, and fewer antibiotics in the meat supply chain.

The future of food is healthy and sustainable

In the last 50 years, global food production and dietary patterns have changed substantially. Increasing crop yields and improving production have helped improve life expectancy and reduce hunger. How-ever, these benefits are being offset by massive environmental degradation due to unsustainable farming practices, along with health problems ranging from obesity to heart disease, as diets become higher calorie and heavily processed.

According to the World Health Organisation, overweight and obesity levels have tripled since 1975, with 39% of adults now over-weight and 13% obese. At the same time, 9.2% of adults are underweight. The coexistence of people being overweight and under-weight has created a double burden of malnutrition in our world. So, it is safe to say that malnutrition is an issue.

Due to these issues, we are seeing shifts in consumer preferences towards healthier and sustainably produced food. We find the most attractive investment opportunities in plant-based food and beverages, in meal kits, and in restaurant software. Pure-play food companies in these segments are becoming more relevant to consumers, they operate in a very large market, and have relatively low product penetration. This provides them with excellent growth opportunities. Cultured [that is, lab-grown] meat looks promising from an environmental perspective and its production costs are decreasing. Its commercial viability, however, is still unclear.

Challenges remain for food giants because they still derive most of their sales from relatively unhealthy food. They are improving though. We find smaller packaged food companies with a better health and sustainability profile better positioned for now.