By: Rory Kutisker-Jacobson, portfolio manager at Allan Gray

From the Government of National Unity’s failure to agree on its maiden Budget, to Trump’s market-moving “Liberation Day” tariffs and South Africa’s diplomatic woes, South African investors have had to contend with heightened uncertainty recently.

“This environment underscores the importance of maintaining a disciplined investment approach. Investors who focus on fundamentals and recognise enduring trends that influence companies, sectors and the broader economy are more likely to achieve better long-term outcomes,” says Rory Kutisker-Jacobson, portfolio manager at Allan Gray.

Kutisker-Jacobson says there are five key trends emerging that long-term trends that investors should be paying close attention to, according to Allan Gray research.

Trend 1: Global consumption trends really matter

China manufactures around a third of the world’s goods, yet its 1.4 billion people account for just 12% of global consumption. In contrast, the US produces less than 15% but consumes nearly 30% of global goods and services.

Kutisker-Jacobson says this imbalance has been a key factor behind moves like US President Trump’s Liberation Day tariffs, aimed at boosting domestic production and reducing reliance on imports.

“Global consumption patterns are shifting and are driven by long-term changes in supply chains, pricing and consumer behaviour. For valuation-driven investors, sectors like consumer staples (food, beverages, household products) offer opportunities,” says Kutisker-Jacobson, adding that demand tends to evolve steadily over time. “While the sector has lagged broader markets over the past decade, this divergence may present attractive opportunities for investors who understand the structural trends shaping long-term value.”

Trend 2: Wellness trends are changing global consumption habits

“The rising popularity of next-generation obesity drugs like Ozempic, Wegovy and Mounjaro is influencing consumption habits – particularly in the food and alcohol sectors,” says Kutisker-Jacobson.

While the long-term effects of these GLP-1 medications are still being studied, millions are already using them to manage weight and chronic health conditions.

“The proliferation of these obesity drugs has been felt by the alcohol industry, as the medications have been shown to reduce the desire to consume alcohol. This may seem like a significant headwind for brewing companies, like Anheuser-Busch InBev (AB InBev), however, the investment case is more nuanced,” says Kutisker-Jacobson.

While spirits had been gaining market share at the expense of beer for some time, this trend has reversed in recent years, as these medications gained momentum. By some estimates, 80% of the users of the medications are women. As more women shy away from drinking cocktails due to their use of these medications, they are consuming less spirits. In contrast, women account for just 20% of regular beer consumers, and beer consumption has been less affected by the introduction of the drugs. In fact, says Kutisker-Jacobson, the beer category has started regaining its “share of throat”, rising from 46% in 2018 to 50% of total alcohol volume in 2024.

At the same time, Gen Z’s preference for healthier lifestyles has boosted demand for low- and no-alcohol products. AB InBev’s “beyond beer” segment has grown rapidly, with revenue from alcohol-free products up 23% year-on-year from 2023 to 2024 and Corona Cero sales jumping 125%.

Trend 3: Reduced-harm nicotine products are growing rapidly

Younger consumers are turning away from traditional cigarettes in favour of alternative nicotine products such as vapes, heated tobacco and modern oral products like nicotine pouches, says Kutisker-Jacobson.

“While not risk-free, these alternatives are significantly less harmful than conventional tobacco. As a result, companies like British American Tobacco (BAT) are seeing strong growth in their next-generation product lines.”

Though Velo lags competitor Philip Morris’s more entrenched Zyn product in some markets (particularly the US), BAT grew its modern oral revenue by approximately 39% in 2023 and a further 51% in 2024, excluding the impact of foreign exchange.

Trend 4: Technology, trust and the rise of direct-to-consumer brands

“The smartphone has transformed consumer behaviour and fuelled the impact of social media. This has paved the way for entrepreneurial influencers to create and market products directly to consumers in categories that have traditionally had high barriers to entry.”

A notable example is YouTube star MrBeast, who leveraged his massive online following to launch snack brand Feastables in 2022. Promising cleaner, ethically sourced ingredients, he built a US$250 million business by 2024 through outsourced manufacturing and online sales – without relying on traditional retail networks. Feastables is on track to surpass established brands like AVI’s Snackworks (the producer of snack brands like Bakers, Baumann’s and Provita) in revenue by 2025.

“At the same time, private label products from retailers like Woolworths and Pick n Pay are gaining ground as cost-conscious consumers opt for lower-priced alternatives, putting pressure on well-known household brands.”

Trend 5: Discipline remains key

“Though volatility has been heightened in recent months, it is an ever-present feature of markets. Markets go up and down, good news boosts sentiment, and bad news incites fear and panic. Against this, adopting a long-term perspective, rather than reacting to the daily noise of news headlines, can help investors stay focussed on the fundamentals that ultimately drive value of their investments,” concludes Kutisker-Jacobson.