Outlook 2020: Changing Diets Create Investment Opportunities

VIDEO: A vegan boom, reduced wastage, and fast food apps are just some of the ways our attitudes to food are changing, says Sarasin's Jeneiv Shah 

Holly Black 9 January, 2020 | 10:26AM



Holly Black: Welcome to the Morningstar series, "Why Should I Invest With You?" I'm Holly Black. With me is Jeneiv Shah. He is manager of the Sarasin Food & Agriculture Opportunities Fund. Hello.

Jeneiv Shah: Hi, Holly.

Black: So, bit of a mouthful, but I'm guessing the fund kind of does what it says on the tin. Do you want to tell us what you do?

Shah: Yes, that's absolutely right. So, we are a global thematic specialist equity fund looking at the food and agriculture value chain. And what we're trying to do is tap into the growth of what we call the food economy. So, that's all the processes, interactions and activities involved in the production of food right through to the consumption of food.

Black: So, I guess this is stuff like the way our diets are changing. In the U.K., people are getting very health and wellbeing conscious or there's a big vegan trend. But elsewhere in the world, maybe people are introducing more protein into their diet.

Shah: Absolutely. So, you're right, diet changes one of our three sub-themes across that food economy. It's a very powerful trend, because there's a lot of change happening, as you know. So, in the developed world, advanced economies, we're seeing health and wellness come through. And people want to shift away from red meat towards white meat, for example. They want more fresh fruits and vegetables in their diet. But in the emerging world, we're seeing a very different trend. So, as people's wealth rises, and as they urbanize, they get access to new food categories such as basic protein, but they also change the way they shop. So, they shop in supermarkets like we do rather than wet markets.

Black: And I guess the way we shop changes as well, because we are doing that through our phones, or maybe just being really lazy in doing it for a food delivery app.

Shah: Yeah, that's so true. Absolutely. We are changing the way that we – how we food and we call that food away from home as our sort of second sub-theme. So, within that there's more eating on the go. We're spending more time traveling for work or for pleasure. So, we eat in airports, railway stations, et cetera. But we're also eating out in restaurants a lot more. Or we're choosing to order takeaway food, and have it delivered at home. So, the way that we food is really changing in its nature.

Black: And technology and disruption is something we hear a lot about investment these days. But I don't tend to think of that as affecting the food chain, I'm probably wrong.

Shah: It's amazing how much technology is now disrupting what we call the food economy and that food value chain. It's everything from the production of food through to consumption of food. The reason technology is important is because the food system, as a whole, needs to become more efficient and more sustainable. And these are for climate reasons. So, food waste is a really good example. If we look at all the supermarket stores that have food left at the end of the day, bread is a very good example, all of that bread just ends up being thrown away. If we can find a way of knowing in advance what someone wants to order, and online grocery ordering is a fantastic way to already predict what we will need. That means that we'll need to purchase less bread and have less bread on the shelves. So, I think food waste is one way that we can use technology to make the food system more sustainable.

On the other end of the spectrum, when we look at how we produce grains, if we can understand as we're passing a tractor or combine harvester through a field, where the weeds for in particular, or where the crop is, we can use cameras, sensors, data, analytics, to have precision agriculture tools, and again that will reduce the use of fertilizer which is much better for the environment.

Black: That is incredible, these high-tech tractors out there in the field.

Shah: Absolutely. Yeah, that's right.

Black: So, these all seem very on trend with some of the big issues centerstage at the moment. Is that a good tailwind for you going into 2020?

Shah: We do think that, absolutely. We think that next year, the outlook is very promising. So, because of all the opportunities for those three sub-themes, diet change, that's just a structural, durable trend in nature, that just won't change. And it will run for many, many decades. But on the technology side, that's changing very rapidly. There's a lot of startups that are putting capital to work in Silicon Valley. They're all looking for ways to improve how we produce and consume food and make it much more efficient. So, we think our universe of ideas is growing at a pretty tremendous rate.

Black: Well, thank you so much for your time.

Shah: Great. Thanks, Holly.

Black: And thanks for joining us.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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