Investing along the Sugar Spectrum

The war on sugar is in full-force. Americans eat way too much sugar and as a society, we’re trying to cut back. This is a major shift in food & beverage consumption. As big changes in consumer behavior manifest, there’s money to be made. For this reason, products with less sugar are really interesting to entrepreneurs and to investors.

At the leading edge of the no-sugar movement today is the keto diet, which requires limiting carb and sugar intake to achieve a state of ketosis. It was the #1 diet trend on Google in 2018. If done right, the keto diet results in incredible before & after (@ketotransformations).

On the other hand, there’s growth in the acceptance of indulgence. This is tackling the sugar problem by saying: try not to eat too much sugar, but when you do, don’t beat yourself up about it. People like their sweet treats, so they limit their indulgence but look for clean ingredients, natural sources of sweetness (nothing artificial!) and smaller portions. For many consumers, moderation and a balanced diet is more important (that includes permissible sugar).

So, where along the sugar spectrum does it make the most sense to invest?

Let’s take a look at ice cream. High sugar products are the largest segment of the market, which means that low-sugar is still not the key purchase driver for those that “scream for ice cream”.

However, when bucketing the fastest growing brands by sugar level, we see that most of the brands actually fall within“low-sugar”(I define this as <20g sugar/serving).

Low-sugar ice cream is killing it!

Even in a category that is known for sweet treats, the growth is coming from people that want to eat less sugar. And, that’s where I think the opportunity for investment lies. As always, actually making an investment depends on a number of factors i.e. team, distribution, operations, capital efficiency, but all else equal, I’d pick low-sugar.

It is the low-sugar products that have an opportunity to become“everyday products”, whereas the high-sugar products have a lower likelihood of being consumed every single day. Ultimately, I want to put dollars to work in products that are helping Americans eat less sugar.

Consumer investor @ CircleUp. Product obsessed. People focused. Easily intrigued. Rarely impressed.

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