As demand for organic food grows, we'll be harvesting the biochemical field.

“Globesity” is inspiring a rush towards natural foods

October 25, 2017 • HEALTH FOOD

Declining health across the world caused in part by preservatives and artificial foods has prompted calls for change, increasing demand in the biochemical sector.

A changing world is creating a perfect recipe for investment in healthy foods. Climate change, a growing population, and worst, a population dangerously unhealthy, are beginning to affect the way we eat today. Demand for organic food will grow by over 16% in the next few years as more people will choose food made with natural ingredients. So while the appetite for processed food decreases, investment opportunities in the biochemical field will continue to grow.

The world’s population is expected to grow from 7.2 billion today to 9.6 billion by 2050 and upwards of 12 billion by 2100 [1]. Nearly doubling the earth’s population in less than a century naturally creates the issue of increased demand for food. And as these people occupy space, there is less room for farmers to grow their crops. This is only one issue for the agriculture industry as it battles the effects of climate change. 2015 was the hottest year on record and 14 of the 15 warmest years globally have been recorded since 2000 [1]. Despite efforts made, broad consensus is that global surface temperatures will rise between 1.5 to 4.5 degrees Celsius by 2100 1, yet another concern for agriculture and the food industry as a whole.

Likely the biggest driver of this rush towards natural foods is the concerning deterioration of health across the globe, with the number of those obese or overweight tripling since 1980 [1]. To suggest obesity is the greatest epidemic facing the world today is not all that stretched. It is the #5 cause of death in the U.S. (3.4 million adult deaths per year) and costs $2 trillion annually in related healthcare bills. In perspective, this number of casualties is on par with armed violence, war and terrorism [2].

Over the past two years, over ten countries have introduced fat/sugar taxes in an effort to combat this epidemic, dubbing unhealthy foods as “the new tobacco”. Encouragingly, consumers are driving much of this change back to healthy living. Demand for clean labels are stemming from urbanization trends, increased awareness of what goes into foods through social media, and an increased population of middle class now able to afford these higher-cost products, particularly throughout emerging markets.

Recently, Campbell Company of Canada saw soup sales slowdown as consumers’ taste has moved away from high sodium foods, instead favouring healthier organic products. This forced the company to adapt, acquiring Pacific Foods, a maker of natural and organic broths, soups, plant-based beverages and meals.

Nearly one-third of food produced today is spoilt or wasted every year, equating to around 1.3 billion tones. Therein lies a major entry point for investors. The health and wellness food market is estimated to be worth US$1.1 trillion by 2019 [3] and is set to grow exponentially as technological advancement assists in extending shelf life. Efforts are being made through bioprotection solutions to delay spoilage bacteria and increase safety by reducing growth of pathogens in products like cheese, meat and fish, salads and yogurt.

The biochemical sector is using cutting edge technology to extract natural enzymes like pectinase from plants as a catalyst to clarify fruit pulp. We see this enhanced science as an investment opportunity. With the help of enzymes, the makers of juice products are able to increase yield, control clarity, sweetness and shelf life. Enzyme blends, including cellulose and hemicellulose, allow makers to break down cell walls in apples used for apple juice, leading to increased production of 5-10%.

Companies like Chr Hansen are accelerating the shift towards natural ingredients in the food supply chain. Starter culture technology is replacing chemical preservatives in dairy. Interestingly, shelf life for yogurt in Europe averages 2-3 weeks, whereas in the U.S. lasts up to two months due to chemical preservatives used. Probiotics are also replacing antibiotics in meat production. In addition to Chr Hansen, a growing number of companies have committed to cutting antibiotics out of the meat supply chain, which should increase demand for alternative yield enhancers.

So while the appetite for processed food decreases, investment opportunities in the biochemical field will continue to grow. At AGF, our collaborative global perspectives ensures stability in your investments, whatever tomorrow may bring.


[1] Bank of America Merrill Lynch, April 2017

[2] McKinsey

[3] Euromonitor

Commentaries contained herein are provided as a general source of information based on information available as of October 1, 2017 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AGF Investments. The specific securities identified and described herein do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.

Published date: October 30, 2017