Sugar Addiction – Breaking the Cycle

Most of us have an addiction to sweet-tasting dopamine-producing sugary treats. But the trend of rising sugar consumption is rendered unsustainable by the rising rate of ‘diabesity’. We explore in this paper the bittersweet mix of health and socioeconomic issues as well as investment opportunities stemming from our changing relationship with sugar.

Preface by Kerr Neilson

We all have an addiction to sweet-tasting dopamine-producing sugary treats. But the trend of increasing sugar consumption is rendered unsustainable by the alarming rising rates of ‘diabesity’. In this report, we’ll explore the bittersweet mix of opportunities.

At the first International Conference on Nutrition held in 1992, world leaders collectively pledged “to act in solidarity to ensure that freedom from hunger becomes a reality”.

At the second International Conference on Nutrition 22 years later, the commitment changed noticeably – “to eradicate hunger and prevent all forms of malnutrition worldwide, particularly undernourishment, stunting, wasting, underweight and overweight in children … as well as reverse the rising trends in overweight and obesity and reduce the burden of diet-related non-communicable diseases in all age groups”.

As progress is made on the reduction of poverty and incomes in developing countries rise steadily, malnutrition as a result of excessive consumption of fat, salt and sugar has now become a global issue no less challenging than the threat of famine.

Today, an estimated one-third of the world’s population, some 2.1 billion people, are either overweight or obese, while the number of people suffering chronically from hunger is an estimated 805 million.

Among the chief culprits for the so-called global obesity epidemic and the sharp increase in the prevalence of diabetes, sugar was at last recognised for what it was, though it had been a suspect since the 1960s.

It is a truth almost universally acknowledged that sugar-sweetened beverages are the easiest means of adding empty calories and gaining weight. But one does not need to be sipping Coca-Cola or chewing on a favourite marzipan bar to fall prey to sugar. From fibre-rich cereal to fat-free yogurt, from old-fashioned ketch-up to exotic teriyaki sauce, one finds added sugar in 80% of the foods in our supermarkets, including many of the perceived “healthy” varieties.

But change will occur, even if slowly. Nationwide education campaigns about the health dangers of excessive sugar consumption, more transparent food labelling requirements, and a cautious but visibly increased use of various forms of sugar taxes are beginning to alter consumers’ psychology and affect their behaviour. So, one of the curious minds at Platinum, Constance Zhang, decided to explore some of the opportunities presented by these new trends and put together a sugar-coated note which we entitled Who Wants to Play Candy Crush.

The interesting thing we have observed is that while there is an increased offering of “sugar-free” and “low calorie” foods and drinks, they are not “non-sweet-tasting”.

People are not abandoning their sweet tooth (if it were only so easy to give up an addiction!), but are instead looking for alternatives that have a reduced impact on their livers and waistlines.

There is ample room for product innovation and natural sugar substitutes like stevia appear to be fast overtaking the synthetic incumbents.

I believe Constance has pulled together a fascinating study of an investment theme. It will give you a sense of how a theme can sprout various leads that one can follow to develop investment ideas. Note how multi-faceted this single idea becomes as one teases out whole groups of companies that are affected by the prevalence of this natural craving by consumers.

I hope this provides you with some interesting ideas for your portfolio or at least has value in relation to one’s behaviour – investing and lifestyle!

Sugar Addiction - Breaking the Cycle

DISCLAIMER: The above information is commentary only (i.e. our general thoughts). It is not intended to be, nor should it be construed as, investment advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and circumstances. The above material may not be reproduced, in whole or in part, without the prior written consent of Platinum Investment Management Limited.