The Impact of the Wellness Trend on Stocks
The focus on health and wellness has expanded beyond weight loss, encompassing various aspects such as fitness, nutrition, appearance, sleep, and mindfulness. Morgan Stanley highlights the increasing attention given to health by consumers and governments, driven in part by the Covid-19 pandemic. The rise in healthcare spending and the cost of treating obesity-related diseases have led to a more interventionist approach to consumer health. Weight loss drugs, like GLP-1s, have influenced dietary habits, with customers buying less while using appetite-suppressing medications. Europe has taken a relatively more interventionist policy stance, implementing taxes and restrictions on unhealthy products to promote better health.
Beneficiaries of the Wellness Trend
Morgan Stanley identifies several sectors that stand to benefit from the wellness trend. "Functional" foods, skincare and cosmetics, consumer health, and nutrient-dense foods like protein powders are expected to thrive. French food producer Danone is well-positioned for the global shift towards wellness, with all three divisions of the company—essential dairy and plant-based products, water products, and specialized nutrition—poised to benefit. Glanbia, a major US manufacturer of protein powders, and Nestle, with its nutrition division producing protein powders and supplements, also receive positive ratings.
Opportunities in the Personal Care Category
The "personal care" category is expected to continue benefiting from the increased association of looking good with feeling good. The "medicalisation" of skincare is predicted to persist, with a growing uptake of active and dermatological products, including SPF. Key beneficiaries in this category include L'Oreal, Beiersdorf, and Intercos. Consumers spending less on groceries may have more disposable income, mitigating concerns around spending on discretionary beauty products.
Risks for Alcoholic Beverages and Soft Drinks
The wellness trend poses risks for alcoholic beverage and soft drink companies. Medical studies have shown that GLP-1 drugs can effectively reduce alcohol consumption and relapse-drinking behaviors. Stocks with an underweight rating in this sector include Diageo and Remy Cointreau. However, beers are expected to be less affected due to the skewed consumption patterns of GLP-1 drugs towards women. Brewer Anheuser-Busch Inbev is considered the best positioned in this regard. Soft drinks, on the other hand, have seen a shift towards low- or no-calorie options, which may soften the potential impact. British soft drinks producer Britvic is expected to fare better than Fever-Tree, which produces mixers and could be affected by weakness in the spirits category.
In conclusion, the wellness trend has wide-ranging implications for various industries. While some sectors stand to benefit from the increasing focus on health, others face potential risks. Investors should carefully consider these dynamics when assessing the performance and potential of stocks in the current market landscape.
The Wellness Trend: A Double-Edged Sword for Stocks
The wellness trend, according to Morgan Stanley, is reshaping the stock market landscape. While it presents opportunities for some sectors, it poses threats to others. This trend is driven by consumers and governments focusing more on health, partly due to the Covid-19 pandemic, and the increasing healthcare costs associated with obesity-related diseases.
Wellness Trend Beneficiaries
The wellness trend is expected to benefit "functional" foods, skincare and cosmetics, consumer health, and nutrient-dense foods sectors. Companies like Danone, Glanbia, and Nestle are well-positioned to capitalize on this trend. The "personal care" category, including companies like L'Oreal, Beiersdorf, and Intercos, is also expected to gain from the association of looking good with feeling good.
Impact on Personal Care Products
The "medicalisation" of skincare is predicted to continue, with consumers increasingly opting for active and dermatological products. The wellness trend could potentially lead to consumers spending less on groceries, freeing up disposable income for discretionary beauty products.
Risks for Alcoholic Beverages and Soft Drinks
However, the wellness trend could pose risks for the alcoholic beverages and soft drinks sectors. Medical studies have shown that GLP-1 drugs can effectively reduce alcohol consumption and relapse-drinking behaviors. Stocks that could be negatively affected include Diageo and Remy Cointreau. Beers, however, are expected to be less impacted due to skewed consumption patterns of GLP-1 drugs towards women. Anheuser-Busch Inbev is considered well-positioned in this regard. The shift towards low- or no-calorie options in soft drinks could potentially soften the impact, with Britvic expected to fare better than Fever-Tree.
In essence, the wellness trend represents a double-edged sword for stocks. It offers opportunities for some sectors while posing threats to others. These dynamics should be carefully considered by investors and new businesses looking to navigate the current market landscape.