It's not just the virtues of democracy and the efficiencies of Western business practices that are spreading to emerging markets. Though we'd like to believe we're only extending our best ideas around the world, any rational person knows that this isn't the case.
Today, I'm going to focus on one of our less virtuous behaviors being adopted by folks in emerging markets: a wildly unhealthy diet. I'll give some data to back up my assertions, show how you could profit from this movement, and at the end, offer up a special free report on three American companies with great exposure to emerging markets.
Let's start stateside
It's no secret that obesity and diabetes have become alarming problems. According to the National Institutes of Health, roughly 26 million Americans, 8.3% of our population, suffer from diabetes. When it comes to obesity, the Centers for Disease Control points out that the facts are even grimmer: over 90 million Americans are obese.
If we throw in "overweight" individuals along with obese (the technical definitions are different), 68% of Americans over 20 had an unhealthy body weight in 2008. Sit back and think about that number for a minute: only three in ten Americans actually maintain a healthy body weight.
Look at the maps below to see how both obesity and diabetes have been increasing in America since 1994.
Source: Centers for Disease Control and Prevention.
Source: Centers for Disease Control and Prevention.
Source: Centers for Disease Control and Prevention.
Like all things, someone is profiting from this trend. Obviously, fast food chains have something to do with it, as well as a busier pace of life that precludes preparing fresh meals, a lack of physical exercise, and the effects of stress. I'll get to those things later when we talk about the emerging world.
But there are two industries benefiting from the control and prevention of such diseases. The first, and most obvious, is the pharmaceutical industry. In 2010, consumers spent $7.2 billion on Pfizer's (NYSE: PFE) Lipitor and $3.8 billion on AstraZeneca's Crestor, both drugs that help lower cholesterol. Meanwhile, $3.5 billion was spent on Takeda's Actos diabetes drug.
But while treating is one thing, educating and preventing is another. That's where the healthy-eating, organic-food movement comes into play. Buoyed by a slew of compelling documentaries on America's food crisis, this trend has some serious legs under it. Since 2000, while total food purchases have risen by about 3% per year, organic purchases have exploded, growing at an almost 16% annual clip. No public company has furthered this movement more than Whole Foods (Nasdaq: WFM).
Let's take China as a proxy
Take a step into any emerging market and you're likely to see some familiar names on the streets and in the food courts. Though McDonald's (NYSE: MCD) might be the most ubiquitous fast food brand on Earth, it's Yum! Brands Kentucky Fried Chicken that has really taken hold in the world's second-largest economy.
Though McDonald's aims to have 2,000 locations set up in China by the end of 2013, Yum! is far ahead. At the end of 2011, Yum! had 4,500 restaurants in its Chinese division, most of which were KFC and Pizza Hut franchises.
The effects of the introduction of these types of foods are already starting to wear on the health of the average Chinese citizen. In 2003, it was estimated that 9.7% of the Chinese population had diabetes, a number already higher than America's current rate. By 2009, that number had spiked to an alarming 12.6%.
Surprisingly, the rural populations, which tend to be less wealthy and westernized, saw their diabetes rate grow faster, from 6.1% to 9.8%. Some of this may be due to the fact that KFC has focused on setting up shop in rural towns, where rent is cheaper and competition more scarce.
How to profit
If you are looking to profit from this trend, pharmaceuticals are no doubt worth the research. Beyond the companies already mentioned, VIVUS (Nasdaq: VVUS) and Arena Pharmaceuticals (Nasdaq: ARNA) deserve some attention. Both companies are developing drugs that promise to help reduce obesity. Be sure to conduct your own research, though, as biotech firms are prone to huge price swings.
As far as a grocery chain like Whole Foods is concerned, thoughts of expanding into China -- or other countries plagued by the Western diet -- are simply idle thoughts for now. If you'd like to know where our top analysts think you should be putting your money if you want to benefit from emerging markets, check out our special free report: "3 American Companies Set to Dominate the World." Two of the three companies are actually mentioned in this piece. But to find out which ones, you'll have to get your copy of the report today, absolutely free!
