By 2050, the number of people aged over 80 globally is expected to have tripled. This will have implications for many industries, including healthcare. Milford Investment Analyst Dr Deborah Lambie talks with Ryan Bridge about what’s ahead for healthcare, and the effect of a shrinking workforce.

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Bridge talks Business: 17 September 2024
Episode Transcript

Ryan Bridge
Kia ora, I’m Ryan Bridge and welcome to Episode 6 of Bridge Talks Business with Milford. If you haven’t already, please like, follow and subscribe. This week, we’re going to focus on a trend that’s not only reshaping the fabric of society, but also creating huge business growth opportunities around the world. The ageing population, out with the new and in with the old. Here’s a thought, if everybody’s getting older and no longer working in the workforce, who’s going to be left on the shop floor? Who’s going to be left in the office? We’ll look at that shortly, but first, here are your top five business bits from the last seven days.

1. Auckland Airport announces a $1.4 billion capital raise via share placement to repay debt and provide flexibility around ongoing capital expenditure programmes.

2. Arriving through those airports, migration data shows a net arrival of 69,000 for the year. It’s a modest drop, details revealed though, plenty of Kiwis still heading across the ditch to Australia, a new record of 133,000 annual departures.

3. Monthly prices were up in August slightly and don’t panic. The partial inflation data confirming the expectation that the annual run rate for CPI will continue down.

4. A surprise from the US – slightly hotter than expected inflation, but the year on year rate, 2.5%, the lowest since February 2021, and still slightly above the Federal Reserve’s 2% target.

5. This week investors will see and hear from the Federal Reserve. They meet to discuss interest rate policy. A cut is almost guaranteed, but will it be a quarter of a percent or will it be a half?

Which brings us to our interview for today and we’re talking demographics. Around the world, people aged 60 and over are expected to double, yes, double by 2050. And this creates huge opportunities for businesses right around the world, including here in New Zealand. But it also poses a number of questions. If everybody’s getting older, if everybody is ageing, who’s going to be left to do all the work? These are questions for Milford Investment Analyst, Dr Deborah Lambie, who is with me. Welcome. Great to have you on the show.

Deborah Lambie
Thank you. Great to be here.

Ryan Bridge
Thank you so much. Now, just a note that this is informational only and should not be taken as financial advice. The other day I was talking to my grandma. She’s 86, right?

Deborah Lambie
Yes.

Ryan Bridge
She went to hospital. She’s had one knee done, getting the other knee done. And they’re in the waiting room and the doctor said, hands up if you need a knee or if you need a hip. She said just about everybody.
Deborah Lambie
Wow.

Ryan Bridge
Everybody in there put their hand up. Yeah. So, there’s obviously huge demand. We know that. Who’s making the knees and the hips?

Deborah Lambie
Yeah, this is really interesting. And so, as you’ve said, these stats. We know that we’re going to go from roughly – that the proportion of people who are aged over 60, 65 in New Zealand – is going to double by 2050. Over 85 is going to triple by 2050. And companies, of course, are seeing that this is a significant opportunity for them because ageing populations, they place increasing demand on healthcare, things like hospitals, things like death care services, et cetera. And there’s a number of companies that are focused on these trends. So, a great example would be a hospital like HCA Healthcare. That operates over 180 hospitals in the US. And they have said that they expect demand for healthcare overall to increase from growing at around 4% to 6% per year over the next decade. And so that means that over that period of time, their revenue will actually have doubled. That’s quite a lot.

Ryan Bridge
It is. When you say death care, what’s death care? Do you mean funerals?

Deborah Lambie
Ah, so death care. Yes, exactly. And a good example of this is a US company called Service Corps. And they do things like funerals, cemeteries and cremations. And I went and I visited them in the US earlier this year. And what they said is that they are expecting a tailwind in volumes for a decade and a half. And that’s driven by the first cohort of baby boomers turning 80, which happens in 2026. So, a massive increase in volumes expected there.

Ryan Bridge
So, for caring towards the end of those years, and also for taking care of what happens when they eventually die.

Deborah Lambie
Exactly.

Ryan Bridge
Huge opportunity. What’s happening to the valuations of these companies?

Deborah Lambie
Yeah. And so these are companies that are steady eddies. So, it’s not your Nvidia that’s massively gone up like we’ve seen in the AI boom. But these are companies that are seeing a steady acceleration in demand for their products. Another example would be AstraZeneca, which is talking about expecting an increase in demand for medicines over the next decade, increasing to around 6% per year as well. And what we’ve seen is that these companies have been actually performing pretty solidly with very respectable returns. So, AstraZeneca and Service Corps have delivered low double digit returns on average over the last five years. And then HCA, the hospital operator, that’s delivered 25% return per year on average over the past five years, which is pretty impressive for a company that makes healthcare services or provides healthcare services for people who need it.

Ryan Bridge
Yeah. So, okay, so there’s huge opportunity and there’s obviously the aging population demographic part of it. The question I always have about this is, who’s going to be left running things?

Deborah Lambie
Exactly.

Ryan Bridge
Where are the workers? Like, how are we going to actually staff businesses of the future if there is such a skew, if we have such a huge ageing population and we don’t have enough working population?

Deborah Lambie
Yes. And so, if you think about healthcare specifically, for example, we’re going to have much more requirements, a bigger burden placed on our healthcare systems. Plus, you’re going to have less people to do the work because of course we’ve got a shrinking working age population. And so, in healthcare, that means we’re seeing companies increasingly look for solutions and things like automation and robotics to kind of fill this gap. And an example that I think is really interesting in the US, not here yet, is automated pharmacies. How they work is you scan your QR code and then a robot goes and it gets the medicine in the right quantities, brings it back to you and then voila, you have your prescription. No humans required.

Ryan Bridge
And I was just thinking, would that be more dangerous potentially if they get it wrong?

Deborah Lambie
I think probably less likely.

Ryan Bridge
Yeah. Wrong because human error.

Deborah Lambie
Yeah, human error, exactly. And then if you look outside of healthcare, all the way from things like manufacturing through the logistics, those sectors are also facing a shrinking workforce and looking for solutions. And so, what we’ve seen in manufacturing, for example, is that robot density – so the number of robots in manufacturing – that’s more than doubled over the past six years. And that’s set to increase further. And we know that that’s safer for people because they take the load of heavy lifting. We know that it actually increases productivity and of course, less people are required. So, we’re seeing more and more of that, not just in healthcare, but in other sectors as well.

Ryan Bridge
What about companies that are not specifically set up for healthcare or to deal with an ageing population or to target to meet the needs of an aging population? Like, I was looking at iPhones, latest announcement the other day from Apple, and they’re talking about the earbuds that you put in your ears, making them basically cheaper hearing aids for people and then trying to sell this to the baby boomer generation. Are there other companies that are accessorising their products just to meet the needs of this market?

Deborah Lambie
And that’s such an interesting example. And it just goes to what a big opportunity this is and how significant the size of the prize is for companies that can actually do that. And a couple more examples that I think are really interesting would be Amazon’s Alexa which now has a new version of Alexa, which is for seniors. And that helps with things like medication reminders, health monitoring and then emergency contacts. And then back to the robotics theme, Toyota is investing and innovating on the robotics side. And they have a robot to help seniors with activities of daily living. So, things like it can pick up tasks and do things like that. So, we’re seeing companies more and more interested investing in this space. And we’re just starting to see the first wave of innovations come out.

Ryan Bridge
It’s incredible, isn’t it? So, this is something you’ve obviously looked at really closely. You’re also a medical doctor yourself. How do you see the opportunities for investors? What sides of the business, and what types of businesses would people be looking at?

Deborah Lambie
A really interesting example that I’ve been thinking a lot about lately is actually the global contact lens market. And so, what we know is that as people age, their vision generally worsens. And then we also know.

Ryan Bridge
You can tell when grandma’s like, I can’t see you.

Deborah Lambie
Yeah, exactly. I can’t see you. And we also know that we’ve been using much more screen time. And so, the iPhone 4 came out 10 years ago. And that’s generally thought of as the mass kind of catalyst for increasing screen time. And so, we’ve now got 10 years of children and adults with a massive increase in screen time from what we previously saw. And so, that means that we’re seeing an increase in vision issues. Currently around the world, one in three people have vision issues and that’s forecasted to increase to one in two by 2050.

Ryan Bridge
Wow. And that’s to do with the ageing population, as well as the fact that we’re killing our eyes with screens and whatnot.

Deborah Lambie
Yes, exactly. So, it’s an industry that’s growing. That’s growing a lot. And then there’s another shift that’s happening in the industry as well, which is the shift from previously … I’m not sure if you use contacts.

Ryan Bridge
I do.

Deborah Lambie
You use contacts. Do you use daily?

Ryan Bridge
Daily ones.

Deborah Lambie
You’re on dailies. So, you are an early adopter of daily contact lenses. And so, the whole industry is shifting from monthlies or biweekly. So, when you use a contact lens for a month that you’d reuse.

Ryan Bridge
I don’t because it’s gross. It’s scody.

Deborah Lambie
And also, if you move to dailies there’s less infection, they are more comfortable, there’s a number of benefits. I think that actually there’s good evidence that they’re better for your vision over the long term. And so, we’re seeing the shift at an industry level from monthlies. And if you use monthly contact lenses, you use one for a month per eye. So that’s 20 for a year. Yeah. And then you using your dailies will be using one a day per eye. So that’s seven hundred contact lenses per year.

Ryan Bridge
Well, so these guys are going to make bank.

Deborah Lambie
Exactly. And what we’ve actually seen is in the short term, it’s been so hard for the companies to ramp up their manufacturing enough because if the average person is going from using 30 contact lenses to 700 contact lenses in a year, it’s been a massive uptick in manufacturing requires. So, they’ve had to invest a whole lot in order to make these contact lenses. And that’s been a big challenge for companies. So, at the moment, basically everything they can make on the daily side is being sold. They’ve been able to get really good price for their daily contact lenses. And then over the next few years, it’s expected that this will still continue. So, basically everything they can produce on the daily side, they’ll be able to sell, just because it takes so long to get the facilities up and running fast enough to sell those contact lenses.

Ryan Bridge
They’re like selling like hotcakes.

Deborah Lambie
Yeah.

Ryan Bridge
I’m certainly buying them. And I agree with you on the price. They’re not cheap when you’re having to sell out for them for every day. This has been a really interesting conversation. And I guess what’s interesting for me is that when you think about elderly people, and you think about your grandmother or your parents or people that you love, you don’t necessarily think, how can we make money out of that?

Deborah Lambie
No.

Ryan Bridge
But they’re meeting a need, aren’t they? I mean, there are very real health needs, ways that you can make people’s lives better.

Deborah Lambie
Yes.

Ryan Bridge
And it just so happens that this is the vehicle to do it, through business.

Deborah Lambie
Yeah, I agree. And then also on the vision side, on the topic of doing things that helps people, what we’re actually seeing is really interesting advances for children in vision care. And so, now instead of there being just things that you can use as a tool to correct vision, there’s a couple of things that are coming out that allow you to actually slow the progression of vision issues over time.

Ryan Bridge
Wow.

Deborah Lambie
So, there’s special glasses for children that have technology that allows their vision, kind of the progression of vision issues to slow. And there’s new contact lenses that have just been approved in the US that also act to do the same. So, with these children that are coming through with more screen time, it’s going to be increasingly important to see, I guess, these being taken up.

Ryan Bridge
Or we could just stomp on their phones.

Deborah Lambie
Yeah, exactly.

Ryan Bridge
Create one problem and solve it with another. Get rid of the phones.

Deborah Lambie
Yeah, exactly. So, lots of innovation happening both for seniors and then also kind of exciting things happening for children at the same time.

Ryan Bridge
Really cool. Thank you, Deborah. It’s been lovely to speak with you.

Deborah Lambie
Great to have you. Well, great to be here.

Ryan Bridge
Thank you for coming on my podcast slash videocast. I’m sure we’ll have you back again. That’s Dr Deborah Lambie. She is an analyst at Milford. We’re talking about demographic changes, huge changes coming. Even in Australia, I was looking at a step. The number of people aged 85 and over is set to quadruple by 2050 to 1.3 million, something like that. So, a huge number of very old people will be inhabiting this place we call planet Earth. And it’s just interesting to talk about and to think about how businesses can accommodate the needs of those people in that growing demographic, and how they can make life easier for them. And also, I guess, from a business perspective, how those companies might start to grow.

Thank you very much for watching and listening. I will see you all again next week. Ka kite.

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