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China's Big Fat Problem

|Includes: Eli Lilly and Company (LLY)
The traditional Chinese diet is bland. The average meal is primarily vegetables, cooked rice, noodles and fruits with relatively little meat. Natural herbs, roots and spices are thrown in not just for flavor, but because of their digestive properties.
 
In 1987, Kentucky Fried Chicken (KFC) ventured into China, opening its first store in Tiananmen Square, Beijing. Two thousand more outlets sprung up across China over the next twenty years, a rate of 100 outlets per year.
 
McDonalds has opened 900 outlets in China; Pizza Hut, approximately 500. Burger King is late to the party with a mere 25 outlets, but is aiming for fast growth and “intends to be on a similar scale to competitors”.
 
As we all know, fast food products are generally high in saturated fat, processed carbohydrates, sodium, refined sugars, and trans-fatty acids. Such foods have long been associated with illnesses such as diabetes, heart disease, obesity and sometimes even cancer. McDonalds is infamous for being the poster-boy of America’s obesity problem.
 
This month (March 2010), the New England Journal of Medicine published a study that estimates 10% of adults in China are living with diabetes and a further 15% are considered to be pre-diabetic; the disease has “reached epidemic proportions in the general adult population”. This most recent study doubles the previous generally accepted estimate of diabetics in the country.
 
However most adults suffering from the illness do not seek medication, preferring instead to ignore the problem or depend on traditional Chinese remedies instead. But these remedies were designed to supplement a traditional Chinese diet, which is slowly becoming a thing of the past, particularly in cities, where the fast-paced life is more conducive to fast-food consumption. At the same time, the next generation of Chinese seems to be more likely to consult their physician than indulge in some moxibustion.
 
Big Pharma is certainly taking note of these facts, and investors would be wise to do so as well; Eli Lilly anticipates that revenues in China will grow 500% by the year 2015, to nearly $1 billion. The company is even considering some of its operations to India, a move that would help it better service the Asia Pacific region. The move could prove to be very efficient, considering that 7% of adults in India also suffer from diabetes.

Disclosure: No Positions


Disclosure: No Positions