Latest / Best of Business / Deborah Lambie: Milford Asset Management analyst on investors turning towards vision care amid ageing population boom

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Deborah Lambie: Milford Asset Management analyst on investors turning towards vision care amid ageing population boom · Best of Business

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  Speaker 2: Now, the issue of aging populations is becoming more and
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  Speaker 2: more of a focus for investors because get this, I
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  Speaker 2: mean this is massive.
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  Speaker 3: Right.
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  Speaker 2: Globally the number of people aged over sixty is going
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  Speaker 2: to double and those over eighty is going to triple
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  Speaker 2: just in the next twenty six years. And of course
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  Speaker 2: the implications for our eyesight is massive. Debora Lamby from
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  Speaker 2: Milford Act Management is with us.
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  Speaker 3: Now, Hey, Deborah evening, how are you?
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  Speaker 2: I'm well? Thank you? Now, vision care is becoming more critical, right,
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  Speaker 2: not just for individuals but investors as well. What's going
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  Speaker 2: on here?
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  Speaker 3: So right now, globally around one and three people are
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  Speaker 3: myopical short sighted, but by twenty fifty, that number will
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  Speaker 3: jump to nearly one and two, so every second person
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  Speaker 3: will be either myopical or short sighted. And there's a
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  Speaker 3: couple of factors behind this. So firstly, aging populations, which
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  Speaker 3: you've already mentioned. As we get older, our eyes naturally
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  Speaker 3: change and people are more likely to need corrective lenses,
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  Speaker 3: whether that's glasses or contact lenses. And then secondly, increasing
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  Speaker 3: screen time. So have you ever wondered how much our
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  Speaker 3: daily screen habits are picked our eyesight. We are now
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  Speaker 3: nearly a decade on from the launch of the iPhone four,
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  Speaker 3: which is widely thought to have mean the mass driver
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  Speaker 3: of mass smartphone adoption, with the whole world now moving
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  Speaker 3: towards increased screen time, and so it's become pretty clear
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  Speaker 3: that prolonged screen time is not good for your vision
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  Speaker 3: over the long term.
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  Speaker 2: So if you're looking at it from an investment perspective,
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  Speaker 2: in this particular part of the market, who are the
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  Speaker 2: main players?
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  Speaker 3: Yeah, So the global contact lens market, it's around sixteen
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  Speaker 3: billion dollars in size, and there's three big players that
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  Speaker 3: control ninety percent of that market. So there's a Swiss
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  Speaker 3: company called Alcon, along with US companies Johnson and Johnson,
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  Speaker 3: which you probably know from products like band aids, Johnson
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  Speaker 3: baby products, and Listerines. And then there's author US company
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  Speaker 3: called Cooper Vision. And historically the market has grown around
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  Speaker 3: five percent a year, but over the past few years,
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  Speaker 3: with those factors that we've talked about, growth has been
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  Speaker 3: accelerating to just under ten percent a year.
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  Speaker 2: Now, I've been hearing that what's going on is that
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  Speaker 2: there are people who previously might have used like monthly
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  Speaker 2: contact lenses now using daily contact lenses. I imagine that's having
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  Speaker 2: an impact on the market, is it.
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  Speaker 3: That's a great point. We are witnessing a major shift
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  Speaker 3: there as well. So people are moving from as you've said,
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  Speaker 3: monthly or biweekly lenses, which lasts for two to four weeks,
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  Speaker 3: to daily disposable lenses, which are worn for just once
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  Speaker 3: a day. And daily lenses they offer they're more convenient
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  Speaker 3: and comfortable, lower risk of infections, and also thanks to
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  Speaker 3: manufacturing advancements, they're also becoming more affordable. So this shift
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  Speaker 3: is led to a dramatic increase and the volume of
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  Speaker 3: lenses being used worldwide. So if you're using monthly lenses,
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  Speaker 3: you need twenty four lenses a year, so one per
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  Speaker 3: I per month. But with the daily lenses, you need
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  Speaker 3: around seven hundred lenses per year, so that's nearly thirty
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  Speaker 3: times more.
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  Speaker 2: Yeah, I mean that's massive. That's a huge jump in demand, right,
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  Speaker 2: So can companies actually keep up with this increase?
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  Speaker 3: So in short, not yet. Demand for these products has
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  Speaker 3: been stronger than what the companies can actually produce, and
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  Speaker 3: all of the main players have been investing a lot
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  Speaker 3: over the past few years to build out capacity, but
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  Speaker 3: they are still selling lenses faster than they can make them,
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  Speaker 3: so it takes time for new factory lines to come
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  Speaker 3: online and this dynamic is expected to continue for a
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  Speaker 3: number of years. And one of the benefits for companies
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  Speaker 3: is that operating in a simply constrained environment has allowed
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  Speaker 3: them to maintain strong prices for their lenses, which has
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  Speaker 3: been good for industry growth.
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  Speaker 2: So how have the shares of these companies performed then, Yeah.
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  Speaker 3: These companies have been pretty solid performers, especially given they
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  Speaker 3: operate in a more defensive part of the market. So
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  Speaker 3: so far just this year, our con shares are up
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  Speaker 3: around twenty five percent, Cooper shares are up around fifteen percent.
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  Speaker 3: Shares in Johnson and Johnson are up around seven percent,
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  Speaker 3: but that's more diversified, with vision care only making up
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  Speaker 3: around five percent of their total revenue. So given the
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  Speaker 3: aging populations, increasing screen time, and the shift to daily
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  Speaker 3: contact lenses, the contact lens market is really in a
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  Speaker 3: period of transformation and it's the space that invests are
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  Speaker 3: becoming interestingly increasingly interested in.
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  Speaker 2: Oh fascinating stuff. Debraah, thanks for chatting us through there's DEBRAA.
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  Speaker 2: Lambi of Milfed Asset Management.
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