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Investment Institute

Why 2030 will be a pivotal moment for the longevity economy

  • 12 April 2022 (7 min read)

The end of this decade will mark a significant turning point in terms of demographics – the last of the ‘baby boomers’ will turn 65.1   

Economically they are one of the most important groups of people because while baby boomers make up about 22% of the US population, they own 53% of the country’s wealth.2 Globally, people over 65 are projected to spend almost $15trn a year by 2030, up from $8.7trn in 2020.3

Due to both the size of this demographic and its relative prosperity, we see significant opportunities in the coming years as their consumption habits evolve across four key areas of spending - wellness, treatment, senior care, and discretionary or ‘silver spending’.

Healthier and more active lifestyles

The goal for most people is not just about living longer but having a longer period of healthy life. As a result, many baby boomers are adopting healthier lifestyles. Healthcare provider Nuffield Health found the over-65s are the UK’s most frequent gym users, with those aged 72 the most likely to regularly use its facilities.4 Other companies likely to benefit from this increasingly active demographic, in our view, include Planet Fitness, and Basic Fit – the latter of which said in its last annual report that increasing life expectancy and the desire by many older people to remain active was one of the key drivers for growth in its business.5

Companies are increasingly realising the previously untapped opportunities presented by older, more active customers. For instance, Nike launched a new running shoe in 2019 – the CruzrOne – which is specifically designed for those who run at a slower pace,6 while we also see opportunities in sportswear retailers, such as Lululemon.

Baby boomers are also spending significant amounts on supplements, skin and dental care and other similar items. Companies in this space which we think could be long-term beneficiaries of this demographic trend include dental and hygiene stalwart Colgate-Palmolive, whose products span toothpaste, handwash, shampoo and more.

Treating and monitoring illnesses

However fit and healthy we try to be, ageing will always put us at greater risk of certain diseases. This fact, combined with increasing obesity rates, is leading more people to develop multiple chronic diseases – including diabetes, dementia and arthritis – which need to be managed for longer. Six in 10 US adults have a chronic disease, and four in 10 have two or more.7

The treatment of age-related chronic diseases is likely to significantly increase the burden on health systems worldwide, and we believe companies that tackle these challenges with innovative solutions have the potential to create superior outcomes for patients, healthcare providers and investors.

AstraZeneca has enjoyed a great deal of attention since the onset of the coronavirus pandemic thanks to its development of a vaccine, but the company is also one of those at the forefront of treatment for chronic diseases. Its third quarter results showed a 32% increase in revenue – and importantly, a 21% rise excluding the COVID-19 vaccine.8

For medical device company Boston Scientific, Q4 growth was driven by its cardiovascular business, a condition strongly linked to ageing.9 Meanwhile, Edwards Lifesciences, a maker of artificial heart valves, recently cited ageing populations as one of its key drivers for future growth.10

A growing need for senior care

There is increasing demand for senior care, both at home and in dedicated care facilities, as the proportion of the senior population rapidly expands.

The long-term care market is expected to grow to $1.62trn by 2027 from $915bn in 2020, according to Global Market Insights, as populations age and government initiatives – particularly in the US – promote the awareness and use of long-term care services.11

Companies that could potentially benefit from this include Amedisys, a provider of home health care which helps patients to rehabilitate after an operation/injury, or to manage a chronic disease. It also provides hospice care at end of life.

In the US, more than 10,000 people will turn 65 each day for the next decade.12 This creates a significant opportunity for health insurance companies. Research has suggested that if these companies can capture just 1% of this market growth each year, it could equate to an incremental $330m in added sales per year.13 UnitedHealth is one such healthcare and insurance company; during the pandemic it was able to leverage its technology to help connect doctors and patients but we also believe it has strong long-term growth prospects.14

Spending on leisure, pets and financial planning

In the US, people aged between 65 and 74 had the greatest average household net worth compared to all other age groups, according to a Federal Reserve survey carried out pre-pandemic.15 In the UK, 63% of wealth is held by the over 55s.16

The discretionary spend of this age group is significant, creating opportunities across many sectors including leisure activities, travel, beauty and more. For example, before the pandemic, baby boomers were expected to spend as much as 50% more on travel than their Generation X or millennial counterparts.17

One of the companies we find interesting in this space is Brunswick, which makes leisure boats. It saw record sales in 2021 with 23% growth in Q4 net sales, despite supply chain disruptions and labour constraints at some of its facilities. The average age of new powerboat buyers has been consistently over 50 for several years, though the industry has seen a surge in younger buyers since the start of the pandemic.18

Many older people choose a pet for companionship – in the US more than half, at 55%, of US adults aged 50-80 owned a pet in 2019.19 And in total, US households spent over $100bn on their pets in 2020, with that amount forecast to continue growing.20 Zoetis, a company specialising in animal health from livestock to pets, is one of the companies in this area which we see as having the potential for long-term growth.

As the baby boomer generation moves into retirement, it is also likely they will spend more time thinking about wealth planning. We see potential investment opportunities in companies like private banking firm Julius Baer, which reported a 55% jump in net profit in 2021.21

While the longevity economy covers spending by individuals of any age, there is no doubt that the purchasing power of the older generation – combined with more time to enjoy leisure pursuits, and their growing demand for healthcare – is significant. With the last of the baby boomers turning 65 by 2030, we believe this will be a pivotal moment, underpinning many potential growth stories in the years to come.

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