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In 2015, Weight Watchers stocks were plummeting and had lost 73% of their value over the previous few years. And then, something interesting happened. Media mogul Oprah Winfrey decided to invest $42 million in the weight management and wellness company, buy 10% of its stock, and join the board. At the same time, the company also announced that they would expand their focus from weight loss to general health and wellbeing, and company stocks soared by 105%. In the years that followed, WW stocks rose by 450%, and Oprah extended her deal to 2025. What this showed, apart from the fact that Oprah’s seal of approval is an instant boost for stock credibility, is that wellness is no longer an investment afterthought, but a lucrative industry that’s continuously growing and attracting investors looking for diversification.
According to the Global Wellness Institute (GWI), the global wellness economy is now worth $4.5 trillion, growing at a 6.4% annual rate since 2017 and accounting for 5.3% of global economic output. These numbers place wellness stocks on the radar of every investor who wants to look beyond traditional assets and invest in an industry with enormous growth potential.
But what is the wellness industry exactly, and what key sectors drive the most profit?
Generally speaking, the wellness industry includes all these companies whose products and services are designed to improve clients’ health and wellbeing, whether that’s through healthy nutrition, travel, supplements, skincare, or spa treatments.
What are the key wellness sectors driving growth?
Wellness as a whole is having a big moment, but not all its sectors are growing at the same rate. The ones that stand out include:
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Beauty and personal care – worth over $497 million in 2020 and growing at a 4.9% rate. Notable stocks in this category include Revlon Inc., Beiersdorf AG, and The Estée Lauder Companies Inc.
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Nutrition and weight loss – worth over 192.2 billion in 2019 and growing at a 10.6% rate. The sector is expected to reach $295.3 billion by 2027. Notable stocks include Nutrisystem, Inc, Weight Watchers, and Medifast, and, according to Global Market Insights, the sub-sectors to watch closely are the gluten-free food market and the organic food market.
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Wellness tourism – worth over $639 billion in 2017, wellness tourism is on track to reach $919 billion by 2022. North America accounts for the most wellness tourism revenue, followed by Europe and Asia-Pacific.
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Fitness and health clubs – the sector exceeded $96 billion in 2019, with the US leading the way as the country with the most health and fitness clubs (201K). The most trending fitness stocks include Nike, Lululemon, Under Armour, and Fitbit.
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Traditional and complementary medicine – the sector is on track to exceed $296 million by 2017, growing at an annual rate of 19.9%. The sector includes natural supplements such as oils, herbs, and nutraceuticals, as well as CBD, which is perhaps the fastest-growing subsector. In 2019, the global Cannabidiol oil market had already exceeded $414 million, and it’s expected to grow steadily between 2021-2026. Coming in a wide range of products, from the traditional CBD oil to the CBD moon rocks from OCN, the market has enormous untapped potential for investors.
At present, North America is the most prominent wellness market, but experts estimate that, by 2023, Asia-Pacific will grow by 40% and overtake it.
Are wellness stocks a solid asset in your portfolio?
Whenever investing in a company’s stocks, you need to ask yourself if it has what it takes to stay in your portfolio for years and grow in value, or if they’re just a fad of the times and you’ll have to sell them quickly. Wellness, it seems, is not a simple fad, and, in the following years, it has as much growth potential as clean technologies and tech.
To understand why that happened and why all of a sudden wellness seems to have skyrocketed from a niche to a lucrative market, we have to look at society as a whole and the way customer preferences changed.
About ten years ago, not only were wellness products limited, but our contact with them was scarce too. People would go to the spa or have a massage every now and then, but this behavior wasn’t deeply ingrained. Now, however, things are changing, and fast. With increased awareness of the unhealthy side effects of modern life – stress, obesity, anxiety, pollution, just to name a few – people are becoming more self-conscious about the long-term impact of their lifestyle decisions.
As a result, we’re witnessing an evolution of the wellness industry, from something that consumers rarely come in contact with to a non-negotiable part of daily life. When making a purchase, consumers no longer look just for momentary satisfaction; they crave a deeper connection with brands and feel better knowing that their purchase will be better for them and the environment.
Key insights
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The growing prevalence of chronic conditions such as heart disease and diabetes will drive steady growth in the preventive medicine sector.
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Increased awareness of the dangers of obesity will drive more people to invest in fitness services.
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The world is facing a wave of worsening mental health. Stress, anxiety, and depression are on the rise, especially among the young population, which encourages the mass adoption of services such as yoga, guided meditation, and alternative solutions such as CBD products.
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The “wellness economy” is booming, and people are now more likely to trust wellness companies than Big Pharma.
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The COVID-19 crisis has accelerated the growth of the household wellness market. Spending more time at home, and facing a lot of uncertainty, more and more people have resorted to wellness solutions to cope with stress and stay in a positive headspace. Quarantined consumers showed a preference particularly for digital wellness products, healthy nutrition, garden wellbeing products, and an-home wellness for the elderly.
All these trends point to a stable future for the wellness industry, which is starting to establish itself as a direct competitor to healthcare.
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