The whole world seems to be fighting, and all too often losing, the battle of the bulge. But, while that might be bad news for waistlines, it could be good news for your portfolio.
In a report released Monday, Merrill Lynch & Co. Inc. identified several companies that it feels are well positioned to take advantage of what is expected to be a "very promising worldwide market opportunity," by tailoring products and services for overweight people worldwide.
There were about 1.6 billion people around the world who were overweight in 2005 and 400 million were classified as obese. And it looks like an issue that is expected reach global epidemic proportions in the next decade.
Merrill identified companies are from a range of countries including the U.S., France, Japan, and India that are likely to profit from the trend.
Jose Rasco, investment strategist at Merrill Lynch, and Richard Bernstein, chief investment strategist, point out that there are four main methods of dealing with obesity. They are through diet and exercise, healthier eating, pharmaceuticals and supplements and surgical procedures.
The list includes some well-known firms such as Weight Watchers International Inc., Pfizer Inc., Johnson & Johnson, Bristol-Myers Squibb Co., Herbalife Ltd., and Merck & Co. Inc. As an example of the sort of products these firms are developing to address the needs of the market: pharmaceutical giant Merck is developing drugs and a nasal spray that makes people feel full.
Also mentioned are food companies including Campbell Soup Co., Del Monte Foods Co., General Mills Inc., Kellogg Co., Groupe Danone, and Nestle SA. Kellogg got the nod because it makes adult cereals and has a focus on whole grain foods.
Not all the names would be as familiar to most investors. Less well known are ResMed Inc., a U.S. firm that markets medical equipment for treating sleep disorders; Kissei Pharmaceutical Co. Ltd., a Japanese company that manufactures drugs for obesity-related diseases.; Wild Oats Markets Inc., which runs natural food supermarket chains; and Glenmark Pharmaceuticals Ltd., an Indian drug company that has obesity and diabetes drugs in trials.
The statistics indicating the magnitude of the overweight and obesity problem quoted by the Merrill Lynch strategists are sobering. They note that while just 14.4 per cent of the U.S. population was overweight in the late 1970s, 23.4 per cent were by 2002 and, by 2004, that had climbed to 31.6 per cent. They also noted that as many as 30 illnesses and diseases, and even premature death, can be attributed to being overweight or obese. Moreover, obesity-related problems gobbled up 13 per cent of the total U.S. health care costs in 2005, up from 9 per cent in 1998. That figure is projected to rise to 17 per cent by 2017.
But, as the report's authors point out, obesity is no longer just a U.S. problem. The developing world is getting richer and more urbanized and people in those areas are eating more processed foods, leading more sedentary lives and gaining weight. Childhood obesity is also on the increase as children exercise less and eat more unhealthy and fattening foods and snacks.
As a result, the number of obese people worldwide is forecast to climb from the 400 million of 2005 to 700 million by 2015. The number of overweight individuals is also expected to soar from 1.6 billion to 2.3 billion over the same time period.