The global war on sugar: the winners and losers
A new report from Credit Suisse says the global backlash against sugar is about to start hitting the shares of food and beverage makers over the next few years.
Sugar has for decades been blamed for causing obesity and diabetes, but more and more research is concluding that the sweetener is a lot more harmful to human health than previously thought.
Credit Suisse said the new views on sugar mean negative public opinion is surging and the threat of regulation and taxation is rising. While an attempt to ban large sodas in New York City fell flat this year, other countries are currently exploring bans and taxes on sugary soft drinks.
Credit Suisse said the threat to sugar these movements pose is very serious, and it sees sugar demand in the medium-to-long term falling,
“So far, most lawmakers have taken a mixed stance, but we are beginning to see actual progress in places such as New York and Mexico,” the Credit Suisse report said. “We see a real threat that this snowballs as political players and health bodies firm up their stance.
The anti-sugar movement will affect different sectors in different ways. Credit Suisse sees food and beverage producers adapting quickly, either by introducing healthier options or even changing existing products to have less sugar.
“Some of these businesses may find this shift advantageous, depending on their product portfolios, ‘first-mover’ advantage and adaptability (relative to the competition) to changing consumer tastes,” the report said.
“Those that do not risk market share loss and an impact on profitability. Bottling companies will also be at risk, especially those with narrow product portfolios and high gearing to carbonated soft drinks (CSDs).”
Credit Suisse noted the anti-sugar movement is likely to affect sales in the developed world more than in emerging markets, where it said a “different dynamic” exists.
“Propelled by rising population and per capita income, we expect emerging market demand to remain steady or increase,” the report said. “This is due in part to a genuine increase in the amount of sugar that consumers in these regions are eating (and drinking). A younger, more wealthy population will inevitably eat more processed foods and drink more sugar-enriched drinks.”
Which stocks are the most highly exposed to the anti-sugar movement? Credit Suisse points to Coca-Cola Co., Dr Pepper Snapple, Tate & Lyle, Ingredion, Tongaat, Suedzucker, Adecoagro, Khonburi Sugar, Acra Continental, Cultiba and Embotellado ra Andina as the most at-risk stocks. All of them are either in the food and beverage, bottling or agriculture sectors.
But Credit Suisse also sees some companies benefiting from the shift away from sugars. These include producers of sweetening products, as well as food and beverage companies that were already focused on healthy products, or shifting in that direction. The companies that could benefit include Kao, Senomyx, PureCircle, Evolva, Danone, Nestle and United Health.
Source: Credit Suisse
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