What to look for when investing in ASX wellness and dietary supplements stocks
Health & Biotech
When you hear the words “wellness” or “dietary supplements” you may think of Instagram influencers flogging the latest products to make a quick buck.
But the global dietary supplements market — vitamins, minerals and even medicinal cannabis products — is a vast industry expected to grow from $US132 billion in 2016 to $US220 billion by 2022.
It’s a big opportunity for ASX companies in the sector — particularly those focused on Southeast Asia according to a new report from big four accounting firm KPMG,
The ASEAN region (short for Association of Southeast Asian Nations) is emerging as “an international growth hub for premium foods and the health and wellness industry”, the KPMG Food for health report says.
“Globally, health and wellness is positioned as one of the fastest growing food and beverage categories. This is largely due to a sharp rise in chronic disease and illness that is linked to lifestyle and diet.”
An increase in calorific intake and changes to the composition of diets are having a significant impact on the health of ASEAN populations, with over 70 per cent of deaths in South East Asia being attributable to non-communicable diseases by 2030.
Investors considering the listed wellness sector should look for Asia-focused stocks developing products in four key areas highlighted by KPMG:
The healthy packaged food market is expected to increase 5 per cent per year between now and 2022.
“With diet and lifestyle related diseases expected to reach epidemic proportions across ASEAN [south-east asia] by 2030, government intervention and consumer demand is driving the growth for healthier food products.
Look for stocks focused on introducing “functional food and the reformulation of staple food, reducing sugar, salt and saturated fat without compromising taste or texture”.
Demand for protein will double by 2050 when the global population is expected to hit 9 billion.
“The ASEAN market is predicted to be a high-growth market for alternative protein due to both the rapid population increase and the long cultural history of consuming non-meat based protein.”
Look for alternative protein products which offer nutritional value and address environmental concerns associated with traditional protein production. The market should be worth $US5.2 billion by 2020.
The market for probiotics is growing at 7.1 per cent in the ASEAN region to reach $US96 billion by 2020.
Look for wellness stocks pioneering real-time, personalised nutritional advice via technologies such as predictive analytics, diagnostics kits, wearable tech and Internet of Things. More than a third of ASEAN’s consumers now demand personalised nutrition solutions, says KPMG.
ASX wellness stocks
Stockhead last looked at the ASX-listed wellness sector back in May, after Star Combo made a healthy start to life on the ASX.
Since then, most of the key stocks are down, with 15 companies experiencing share price depression in the past three months, including bellwether Blackmores, the large-cap health supplements company, which is down 19 per cent since May.
Skin Elements (ASX:SKN) is the best-performing of the seven companies which have seen gains in their share price over the past three months — it’s up 94 per cent and was sitting at 6c late in Thursday trade.
It is exploring a deal with Affinity Energy (ASX:AEB) to look into using Affinity’s algae and cannabis oils in Skin Elements’ skincare range.
Affinity, however, is down 38 per cent since May.
Probiotec (ASX:PBP) is another that has enjoyed a successful three months, with its shares rising 20 per cent — it was trading at $1.50 in late Thursday trade.
Probiotec, which makes diet shakes, those iconic jellybeans that you find in pharmacies and skin products, is uniquely placed to capitalise on what KPMG calls ‘health by stealth’.
“With diet and lifestyle related diseases expected to reach epidemic proportions across ASEAN by 2030, government intervention and consumer demand is driving the growth for healthier food products,” the report says.
Stockhead columnist Tim Boreham said late last year that Probiotec was “in good health” thanks to its diversified product portfolio.
Vita Life Sciences (ASX:VLS) is another wellness stock that has performed strongly, with its shares up 25 per cent in the past three months, and 17 per cent year on year — in late Thursday trade it was agonisingly close to the $1 mark.
It develops and distributes health products throughout the ASEAN region, which KPMG says is “predicted to be a high growth market for alternative protein due to both the rapid population increase and the long cultural history of consuming non-meat based protein”.
Not mentioned in the KPMG report is the impact cannabis is having on the wellness sector. With news recently that the UN is looking at legalising cannabidiol — one of the active ingredients in marijuana — around the world next year, there is more and more crossover between the medicinal cannabis stocks and health and wellness.
Bod Australia (ASX:BOD) is one of those stocks, and it is up 435 per cent in the past year, hitting over half a dollar in Thursday trade.
The company, which makes a range of vitamins and hemp-based cosmetic products, raised $6.4 million to fund global expansion in late September.
That will give it key access to the alternative protein market that KPMG says “is expected to be worth US$5.2 billion by 2020”.
Here’s a list of ASX stocks that have exposure to the wellness industry:
Scroll or swipe to full reveal table. Click headings to sort