LONDON, Jan 2 - Obesity might be bad news for the economy, but it could help investors pile on pounds of a different variety, investment managers say.

Bad diet and inactivity is pushing up obesity rates and analysts say the epidemic has huge implications for firms in the food production and retailing, healthcare and leisure sectors.

Norwich Union's socially responsible investment team, based at Morley Fund Management, believes the market has underestimated the impact of obesity on company share prices.

"Obesity is a key theme for Norwich Union's Sustainable Future funds. We see this as an investment issue because it can affect companies' long-term profitability," said Peter Michaelis, who manages two Norwich Union funds.

"Rising trends in obesity pose both a risk and opportunity for companies, and it's important to understand to what extent companies are exposed to this and how they are managing it."

The number of overweight people in the world overtook the number of malnourished for the first time in 2006, according to Professor Barry Popkin, director of the department of nutrition at the University of North Carolina.

Obesity costs the British economy as much as 7.4 billion pounds per year, and study published in the British Medical Journal warned in December that dealing with obesity could bankrupt the National Health Service.

Once seen as a quintessentially Western phenomenon, obesity is also fast becoming a major health problem in rapidly-developing countries, like India and fellow Asian giant China, where fatter wallets are changing lifestyles.

But savvy investors could reap the rewards of the "Jamie Oliver effect", says Morley analyst Harriet Parker.

Oliver kickstarted a debate on the quality of food served to children in Britain with his television documentaries on school dinners.

Food companies and retailers that produce high-quality food and healthy lifestyle ranges will enjoy an increase in demand for their products, said Parker.

Healthcare companies that produce treatments for obesity-related illnesses -- diabetes, strokes, heart disease and joint replacements -- are also likely to fare well, as the number of sufferers soars.

Conversely, firms that produce poor-quality food with high sugar, salt and fat content risk losing market share as consumers switch to healthier options, Parker added.

Dialysis products and services firms DaVita, of the U.S., and Fresenius, of Germany, as well as British medical device manufacturer Smith & Nephew, are among those experiencing a surge in demand, said Parker.

Five-a-side outdoor football centre operator Goals and Danone, the French functional foods business known for its "friendly bacteria" products, have also seen their sales and share prices rally.

"The food industry has often been blamed as the cause (of obesity), but there are many companies benefiting from the way the government and consumers are beginning to think about it," Parker said.

"For example, Marks & Spencer's 'eat well' range is part of the reason it's done so well."

In the year to 15 December 2006, Goals' share price rose 74 percent on a total return basis, Marks and Spencer's was up 50 percent, Fresenius increased 46 percent and Danone 36 percent.

In contrast, MacDonald's climbed just 28 percent -- helped in part by the acquisition of significant stakes in companies that emphasise features like freshness of ingredients, and whose customers may pay a premium for healthier eating, such as Britain's Pret ?Manger.

But the formula does not always ring true -- Krispy Kreme Doughnuts, for example, has enjoyed a near 70 percent surge in its share price in the past 12 months.

However, Parker believes the sea-change in eating habits evident in the Western world will soon spread to other parts of the globe.

"People are still eating Krispy Kreme doughnuts, but over time we could well see a reduction in sales.

"Obesity is an issue that's not going to go away. Healthy-eating is becoming mass-market."