Global X ETF Model Portfolio TeamI attended a conference recently that got me thinking about the investors of tomorrow. Millennial wallets are coveted across the global economy. But I’ve got a growing, 8-year-old Gen Zer at home, who makes me wonder how his generation will affect the future of investing—because every generation does. Daily routines often reveal how market forces will affect consumer behavior and vice versa. My grocery bill makes me think Gen Z’s stomachs offer some clues. And what’s more daily than food?
Supply and Demand: More People, More Food Needed
More people living longer will stretch the food supply. Agricultural production may have to increase by as much as 70% to meet demand.1 Estimates peg the global population at nearly 10 billion by 2050 from its current level of about 7.8 billion. Life expectancy at birth’s been increasing too, up from 64.6 years for the world’s population in 1990 to 72.6 years in 2019. By 2050, that number could be 77.1 years given enhanced survival techniques.2
Concerns about food sustainability and scarcity are not just buzzwords; they are industries poised to develop out of necessity. Estimated to grow at a 21.3% compound annual growth rate (CAGR) to $9.96 billion globally by 2025, vertical farming is an example.3 All it takes is light, nutrients and oxygen to produce leafy greens, along with a healthy side of technology. Mass vertical farming, which looks more like a datacenter than a farm, could streamline agricultural distribution, lower emissions and limit water use by leveraging artificial intelligence (AI), big data and the Internet of Things (IoT).
With two out of every three people expected to live in cities by 2050, the ability to generate fresh produce in close proximity to urban dwellers could go a long way toward easing the burden on the food supply chain.4 We are already beginning to see this technology in action. It may begin to resonate more among consumers, especially younger consumers, whose tastes increasingly lean socially and environmentally conscious.
Millennials to Gen Z: You Are What You Eat
For many Millennials, ages 23–38 by some definitions, and Gen Zers, 7–24, it’s simple. Processed food: Bad. Organic food: Good. It’s not just the health benefits of a largely plant-based diet to them, it’s also what that diet represents, i.e., a more humane, ecologically friendly lifestyle that speaks to who they are as people.
According to one survey, Gen Zers (18+) are more than twice as likely to eschew animal protein and identify as vegetarians, vegans, or pescatarians than Gen X and Boomers. Even if not all in, 26% of Gen Zers say that eating less animal protein is a goal, more than Millennials (22%) and the national average (19%).5 For younger Gen Zers, it’s what they’ve been taught: today, more than half of parents who are organic food consumers are Millennials.6
A byproduct of dietary consciousness is the makings of a shift in traditional food manufacturing. Organic is not exotic for Gen Z, it’s often daily life. As Millennials continue—and Gen Z begins—to flex their financial might, manufacturers will have to adjust at a faster rate. Plant-based replacements have started to hit the market, including a beef replicate with a carbon footprint that is 89% smaller than a traditional beef burger.7 Even traditional fast food companies are adjusting their product offerings. It’s Portfolio Management 101: If you don’t change or evolve, you become irrelevant.
Food is But One Component of the Wellness Economy
Wellness is about optimizing physical and mental health through positive decision-making about nutrition, exercise and relaxation, among other practices. Increasingly, wellness is standard behavior for younger generations looking to stay life fit.
Good genes help, but less so than once thought. Long, healthy lives are more a product of diet, physical activity, stress, sleep and relationships, according to lifespan heritability, i.e., the variation between genetic differences and non-genetic differences. Estimates of good genes leading to long healthy lives remain consistently low, in the 15–30% region.8
The implication is that if genes determine less than 30% of aging, a person’s environment, including stress, diet, physical activity, sleep and relationships, account for the rest. The market for that environment is significant. At roughly $4.2 trillion, wellness accounts for more than half of the $7.3 trillion in total global health expenditures. Key wellness segments include Personal Care, Beauty and Anti-Aging; Healthy Eating, Nutrition and Weight Loss; and Fitness.9 Mindfulness is another segment already on the road to monetization.
Genomics Could be Icing on the Wellness Cake
As younger generations hack the life heritability code through wellness behavior, genomics is actually hacking life. The genomics industry may be Gen Zers’ scientific equivalent: young, growing and full of new potential.
Gene editing, the process of inserting, deleting and replacing DNA at a specific site in an organism’s genome, continues to mature. CRISPR-Cas9 technology allows scientists to open DNA at a specific location or substitute individual DNA units without changing the entire strand. It’s thought that CRISPR-Cas9 could address two-thirds of the more than 50,000 genetic diseases caused by a single gene, i.e., what even a routine full of fruits and vegetables and exercise may not be able to solve.10
The first human gene sequencing cost $2.7 billion in 2003. In coming years, it could be less than $100 per genome and take less than an hour.11 As of today, about one in six Americans have taken a genetics test. By 2025, a quarter of the global population is expected to have their genes sequenced, potentially leading to more personalized treatments.
Awareness: Good For Life, Good For the Portfolio
My son asks about the food we eat. He likes yoga sometimes, though he likes break dancing more. Sometime he’ll wander off by himself to read (when his allowed screen time runs out), as he says, “To just be a little quiet.” Such wellness behavior isn’t novel for him or his peers. It’s rote (maybe with an occasional push from this Gen X dad). There’s a big market around that awareness. Portfolio building requires thinking ahead for the long term. If the focus is just today, it’s probably already too late for tomorrow. The wellness market is young, but it’s something investors should know about now.