Consumers are getting smarter when it comes to sugar and leaving it behind

Consumers are getting smarter when it comes to sugar and leaving it behind

More data supporting the drivers behind our Clean Living investing theme is turning up as more people opt to consume less sugar. In aggregate, there is still much more to go to get the American Heart Associations daily added sugar limit, but the progress we have seen has led to companies shaking up their food and beverage formulation. Of course, the key is to do so while still retaining the flavor and taste consumers prefer and in some cases remember. This pain point has created an opportunity for certain companies, one of which is on the Tematica Investing Select List.

Like a snowball that rolls downhill and gets bigger in the process, odds are this choice to limit or omit sugar consumption on the part of consumers will continue, driving demand for these flavor saving companies in the process. it also means we’ll continue to see food, beverage and snack companies introduce new products or acquire existing ones to shore up their respective portfolios.

Per-capita consumption of sugar and other caloric sweeteners was down in the U.S. in 2017 for the third straight year — and 13th out of the past 18. And this time, consumption of refined sugar, which had been rising over the past decade as consumers (and soft-drink makers) turned away from high-fructose corn sweeteners, fell as well.

There had already been talk of a global “sugar glut” brought on by booming production in Asia, ebbing demand in developed countries, and slowing demand growth in emerging markets.

The American Heart Association’s current recommended daily added sugar limitis 36 grams for men and 25 for women. The per-capita 2017 numbers reported by the USDA come out to almost 159 grams a day.

Source: Americans Keep Getting Smarter About Sugar – Bloomberg

Our Scarce Resource theme once again drives food inflation 

Aside from uncovering data points that support our thematic perspective, we also like to connect the dots between our themes as well, given the potential for one theme to be a catalyst for the other. We’ve seen that in the past with droughts — a recurring aspect of our Scarce Resource theme  — and we are seeing it once again as a current drought as this article from the New York Time details:

British shoppers began noticing in recent weeks that hummus prices were up significantly. The cause: a drought thousands of miles away.Insufficient rains in India have resulted in several years of poor harvests of chickpeas, the main ingredient in hummus. The country, by far the world’s largest producer of chickpeas, mostly grows the legume for domestic consumption. But worse-than-expected harvests mean that it has had to buy more chickpeas from growers elsewhere, putting pressure on supplies worldwide and driving up prices.Those limited supplies of chickpeas have combined with rising demand for hummus in Britain to send prices higher. Average prices for the dish at supermarket are 12 percent higher than a year ago, according to the trade magazine The Grocer and the research consultancy Brand View. That is significantly more than grocery price inflation of 3.6 percent, and overall inflation of 2.7 percent.

Source: Rising Hummus Prices? Blame a Drought Half a World Away – The New York Times

As food prices climb, we tend to see Cash-Strapped Consumers switch their spending to different items, usually trading down in one item for another to match their budgets. With revolving credit, largely a reflection of credit card debt, having grown at an annual rate of 6.0% to $1.03 trillion in December, consumers are poised to feel the pinch of higher interest rates on their spending dollars.

Said another way, it looks like more will be skipping the hummus in the coming days because they may not be able to afford it.



Amazon Reportedly Has Obtained Pharmaceutical Wholesaler Licenses In 12 States 

Amazon Reportedly Has Obtained Pharmaceutical Wholesaler Licenses In 12 States 

We have seen the creative destruction that Amazon has unleashed on the world of retail and now we are seeing it occur in food & grocery, and soon apparel. Even as Amazon expands its footprint in these markets, it is laying the groundwork for another move into pharmaceuticals. We see Amazon’s underlying logistics business that offers same-day, next day or two-day delivery as a compelling alternative to picking subscriptions up from CVS Health, Rite-Aid, Walgreens, Walmart, the local grocery store, such as Kroger and Albertsons, or even from other online vendors.

In 2015, pharmacy and drug store sales amounted to approximately $263.47 billion with CVS Health was the second leading drug store chain in the United States, generating about 153.3 billion U.S. dollars as a corporation; about 52.5 billion U.S. dollars of that total was generated solely by Rx sales.

Should Amazon continue down this path, it will be interesting to see how CVS Health, Walgreens, Costco Wholesale, Sam’s Club and other companies that sell pharmaceuticals respond. Odds are it will be a painful battle that leads to market share loss, and pressure on sales, profits, and EPS as the reach of the Connected Society expands one step further.


The St. Louis Post-Dispatch reports that Amazon has become a licensed pharmaceutical wholesaler in 12 states, with a pending application in a thirteenth. To ship drugs directly to consumers, competing with large pharmacy benefit managers and mail-order pharmacies like Caremark or Express Scripts, Amazon would also need to be licensed as a pharmacy in each state to which it shipped drugs.The facilities listed on the applications are distribution centers in Indiana. One industry analyst observed to the Post-Dispatch that Amazon may be building its own pharmacy capabilities, or could acquire an existing pharmacy, as it did when it acquired Whole Foods to bolster the grocery business that it had been building for years.The Post-Dispatch was able to confirm through public records that Amazon has been approved as a pharmaceutical wholesaler in the states of Alabama, Arizona, Connecticut, Idaho, Louisiana, Michigan, Nevada, New Hampshire, New Jersey, North Dakota, Oregon, and Tennessee. An application in Maine is still pending.

Source: Amazon Has Obtained Pharmaceutical Wholesaler Licenses In 12 States – Consumerist

Facebook joins Amazon in disrupting food delivery 

Facebook joins Amazon in disrupting food delivery 

Recently it was announced that Amazon (AMZN) partnered with Olo, a supplier of order and pay technology to thousands of U.S.  restaurants, to expand its burgeoning food order/delivery service. After testing a similar solution over the last year, Facebook (FB) is now taking its own take on this live across the U.S. As we watch these and other competing services that are likely to develop (where is Alphabet/Google on this?),  it will be interesting to see the split between online orders at home or office vs. mobile orders.

We suspect mobile activity, as with several other aspects of our Connected Society investing theme, will win the day. We also suspect restaurant companies, especially smaller ones, a breathing a sigh of relief that as they embrace this technology disruptor their fate may be somewhat different than brick & mortar retail.

Facebook Inc. wants to be a bigger player in the restaurant game.The social network has announced a new feature that will let users buy meals on its website through third-party delivery services like DoorDash or directly from a group of restaurants such as Chipotle Mexican Grill Inc. and Five Guys.

Facebook has been working on the new product for a year, and carried out tests with restaurants including Papa John’s. It’s part of tech company efforts to boost their presence in the restaurant industry.

Source: Facebook to Take Food Delivery Orders Directly on Its Website – Bloomberg

Pet Food is a Growing Food with Integrity Market

Pet Food is a Growing Food with Integrity Market

Our Foods with Integrity investing theme is expanding to include more of our loved ones. That’s right it’s moving past family and friends to include our pets as the food with feed them goes all-natural, grain free and includes vegetables and fruits. Just like with people, these good for Rover products are growing faster than mainstream products;

“Just like people spend more money on their own good nutrition, they also want to do this for their pets,” Nestlé Chief Executive Mark Schneider said in February.Pet owners in developed markets are cultivating stronger emotional bonds with their dogs and cats, motivated by later marriages, smaller families and elevated divorce rates, according to Euromonitor.


In 2016, the U.S.’s 84.6 million pet-owning households spent $28.2 billion on pet food, up 23% from a year earlier, according to the American Pet Products Association. That translates into $333 spent per household last year.

Source: Beef Stroganoff for Your Dog? Pet Food Goes Upscale – WSJ

Adverse Weather Conditions Have Europe Importing US Vegetables

Adverse Weather Conditions Have Europe Importing US Vegetables

Weather can be a very disruptive force when it comes to the supply of food and other commodities. Crops can flourish under right conditions, but adverse weather conditions can reduce harvests we tend to see prices spike whether it be coffee, corn and the like. Following a near record corn crop, consumers in the US are experiencing the benefit of food deflation that is helping Cash-strapped Consumer dollars go a bit further. In Europe, however, cold weather has led to countries importing vegetables from the US. Shipping and freight costs, airline handling fees and the strength of the dollar make for a pricey solution for this current scarcity. If this weather continues into the March planting season vegetables could become an affordable luxury.

Due to cold weather in Europe’s key vegetable supplying countries, the continent is dealing with an extreme vegetable shortage. “The last time Europe dealt with a vegetable shortage like this was in 2005,” says Lisa Sternlicht with California-based A.M.S. Export.

In spring 2013, we exported a little bit of iceberg lettuce to the UK, but now we receive requests from the UK, the Netherlands, Germany and Switzerland. Even the Spanish might be in the game pretty soon,” continued Sternlicht.

It is uncertain how long Europe’s demand for US vegetables will last. Will the consumer continue to pay high prices for vegetables or will they switch to alternatives? “Airfreight comes with a price,” shared Sternlicht. Landed costs into Europe are around 2.3 and 2.5 euros per kg. On top of it, you have to add duties and airline handling. The strength of the dollar and the post-Brexit weakness of the GBP make it pricey.
The current supply shortage could become even bigger in March. Important vegetable growing regions like Murcia in Spain plant produce this time of the year for a March harvest. The extreme cold weather has made it complicated to plant and time will tell what the impact will be.

Source: US vegetables flown in to Europe during unprecedented shortage

Antibiotics + farm animals = driving force for consumer shift to food with integrity

Antibiotics + farm animals = driving force for consumer shift to food with integrity

One of the reasons people are shifting to organic and natural products is has been the concern of antibiotics usage when raising food-producing animals. Dairy. Beef. Chicken. Pork. And even fish – antibiotics have been used to assist in growing larger animals that yield greater product size. Have you seen the size of some “regular” chicken breasts compared to the organic/natural variety? Despite changes that begin next week, odds are they will do little to curb the usage of antibiotics and agriculture. To us, it means our Food with Integrity investing theme has legs.

In its Annual Summary report covering sales of antibiotics for use in food-producing animals, the FDA notes that in 2015, sales of these drugs increased overall by 1% from the previous year. More importantly, drugs deemed medically important to humans — those antibiotics that we need to remain effective so that we can continue to treat human patients — increased by 2% during this time. Nearly all (95%) of these medically important drugs were put into animal feed or water — as opposed to being provided individually to animals through injections or orally.

Additionally, while we humans must stand in line with our prescriptions for these vital antibiotics, 97% of the same drugs sold for use in farm animals were purchased over the counter.

Some changes are in the immediate offing for the use of antibiotics in farm animals. Starting Jan. 1, 2017, medically important antibiotics will no longer be available as over-the-counter purchases, but must be purchased with a veterinary feed directive or a prescription.

Critics maintain that these changes will still allow for farmers to simply shift their stated reason for using the drugs from “growth promotion” to “disease prevention,” even though it’s believed that continual, low-dose use of antibiotics only contributes to the development of drug-resistant bacteria that sicken millions of Americans each year, and kill more than 20,000 annually according to the Centers for Disease Control and Prevention.

The FDA acknowledges some of the shortcomings of the data in its Annual Summary. For example, the report has sales figures, but not usage figures, meaning the agency can’t say for certain that all of the purchased antibiotics are indeed being used.

Source: Sales Of Antibiotics For Farm Animals Continues To Increase, Despite FDA Guidance – Consumerist

Byte Foods targets smart vending machines with a fresh twist

Byte Foods targets smart vending machines with a fresh twist

The only thing we like more than talking about one thematic tailwind is doing so when two or more come together for an even more powerful tailwind. In this case, it’s Food with Integrity meets Connected Society and Cashless Consumption as food that is good for you meets smart vending machines. As we enter 2017 looking to follow our own advice to eat better, we hope to see more of these vending machines than the ones stocked with candy and chips from Hershey, M&M Mars and PepsiCo.

A San Rafael-based startup called Byte Foods has raised $5.5 million in seed funding to popularize its smart vending machines and delivery service stocking them with nutritious food and drinks from local vendors.

If the idea of the internet-connected vending machine sounds a bit familiar, it has been around for more than a decade, actually. But according to market research by Berg Insight, only 1.5 million of the world’s 17 million vending machines are actually internet-connected today.

Byte Foods is poised to grow as the IoT share of this market does as well. Berg predicts by 2020, the world will have at least 3.6 million internet-connected vending machines in circulation.

Source: Byte Foods raises $5.5 million for smart vending machines that serve local fare | TechCrunch

China’s growing middle class spurs demand for more than just apparel, footwear, and iPhones

China’s growing middle class spurs demand for more than just apparel, footwear, and iPhones

There are numerous aspects to our Rise & Fall of the Middle Class investing theme. In the developed markets we tend to take for granted the access to food, water, education, healthcare, and other services. As disposable income in the emerging markets rises, we will see growing demand for those products and services above and beyond clothing, footwear, and Apple’s latest device.

A recent survey of 2,000 middle to upper-income Chinese by Ernst & Young revealed that 80 percent view China’s serious pollution problem as a major health worry. People in China are also anxious about the costs of getting sick – 93 percent of respondents with insurance coverage said their coverage was less than satisfactory. They viewed the Chinese government’s basic health insurance plan as minimal at best. The fear of financial disaster from a devastating illness haunts the daily lives of many people in China.

China’s middle class is predicted to hit 550 million people within the next five years. And the biggest growth will be in the “upper middle class,” which earns substantially more than the “mass middle class,” according to consultants McKinsey & Company.

Source: China’s growing middle class needs insurance – Business Insider

Enjoy today’s food price deflation, continued population growth means it’s not going to last forever

Enjoy today’s food price deflation, continued population growth means it’s not going to last forever

We have long held that a growing global population paired with an expanding middle-class, primarily in the emerging markets, would drive incremental demand for resources such as food, energy, and water.  A new report from published in the Proceedings of the National Academy of Sciences calls for the population in Sub-Saharan African countries to grow by another 1.3 billion over the next 30 plus years placing greater import demands for a variety of products, including cereals. Enjoy the current bout of food deflation, which is likely to get a tad better in the coming months thanks to a near record corn crop, but it’s not likely to last.

With a population expected to expand by another 1.3 billion people by 2050, Sub-saharan African countries will have to import half of all needed cereals in the next 30 years, if drastic changes to agricultural methods aren’t taken, the study concluded.

Over the past decade, development organizations have been working on improving the productivity of African farms to deal with food insecurity as the continent’s population booms. By closing the gap between what farms actually produce and what they could produce, Africa would have enough food to both feed itself and become a new breadbasket for the world.But according to a new study published in the Proceedings of the National Academy of Sciences, even closing that gap will not be enough to meet Africa’s food needs. The study, based on 10 countries that account for 58% of the continent’s arable land, found that closing that gap would only maintain the current level of self-sufficiency. It will also need to dramatically increase its agricultural efficiency. Right now, Africa imports 20% of its cereal needs, despite having a quarter of the world’s arable land.

Source: Study: Sub-Saharan Africa will soon have to import half of its needed cereals — Quartz