Odd Lots - The Investors Who Think Hazelnuts Will Be the Next Pistachios

Episode Date: August 14, 2025

We're in an age where shocks can occur on both the supply side and the demand side. On the supply side, the causes are well known. Pandemics, trade wars, and climate disruption have exposed the frailty of supply chains in goods too numerous to list. On the demand side, the tendency for certain goods to suddenly go "viral" among consumers can be impossible to predict. Take Dubai chocolate. The craze for pistachio-filled candy came out of nowhere, in part thanks to social media. Our guests on this episode are super bullish on a different nut. Burton Flynn and Ivan Nechunaev are managing partners at Terra Nova Capital Advisors, where they look for unusual investments in frontier markets all around the world. On this episode, they tell us about their bull case for hazelnuts, including where they're grown, the economics of hazelnut agriculture, and the limited ways of playing this popular nut. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

Thanks for listening to OddLots. Follow the show on Amazon Music for more future episodes or just ask Alexa play the podcast, OddLots on Amazon Music. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a very big. It's a very much. It's a lot. It's a firm. It's a few. It's a few. It's, a commitment to your clients. We're talking top grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com

slash audio. That's vanguard.com slash audio. All investing is subject to risk Vanguard Marketing Corporation distributor. Thinking about buying the right home, but not sure when? What if you had the right design, the right lot and finishes at the right price? Not someday, but right now. Register at Democrathomes.com and get everything you want right now. Bloomberg Audio Studios. Podcasts Radio News. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weissenthal. And I'm Tracy Allaway. Tracy, you know I've never had Nutella before. I know that. I think we were talking about this the other day and I said, and I mean this 100%, and I don't mean it to come off badly, but I genuinely feel really sorry

for you for never having Nutella. I feel like you are missing out on one of the best things in life. And you know, I've never had the Dubai chocolate before either. I know. Again, my sympathy for you just continues to expand. So as everyone knows, you know, I'm just like a real ahead of the curve guy on most things. I was really ahead of the curve on having nut allergies. Because now, like, all kids basically have nut allergies, it seems like, are like half the kids in any, my kids class. But I was, like, really early on in the 1980s. You were having nut allergies before it was cool? I was having nut allergies before it was cool. I'm aware that people love Nutella. I'm aware that people love Dubai chocolate or some people do, or they at least, like, posting about it on

Instagram and all things, pistachios, et cetera. And yes, but I take it. It's all good stuff. It's so good. Oh, my God. It's, I mean, there is nothing better than eating Nutella out of a spoon. Or sorry, eating Nutella out of a jar with a spoon, preferably with a glass of milk. Like, it is so good. It looks good. Dubai chocolate. Have you had it? I have, but I'm not that enamored with it. Interesting. I remember, like, it was probably like a year and a half ago, and I just started seeing, like, signs. It's like, we have the Dubai chocolate.

Oh, they're everywhere now. But the other day I went to the local deli on my block, and they had five, just on the counter, they had five different versions, five different companies selling it, five different products that you could buy, which I take is just some sort of, you know, chocolate with some sort of creamy pistachio in the middle. And if you break it open, it looks good on social media. That's pretty much it. I do find it kind of funny that this like viral chocolate has come out of Dubai of all places, which doesn't necessarily have a, a strong. strong confectionary history, but it has certainly tapped into various luxury markets. So I think that's what's going on. I was looking through the conference called Transcripts on the Bloomberg a few weeks ago. And I was looking like, what companies have talked about this? And there's one big Swiss publicly traded Chocolatier. And they talked about it and they talked about, I guess it was a woman in Dubai just started making it. Yeah.

They called it the Dubai chocolate. Anyway, they were talking about how fast they adapted to TikTok trends, et cetera. But I guess the business of nuts and how it works, not something that we discussed much, maybe because of my own. You know, I'm allergic to talk about these topics. Well, there is one nut that you can eat. That's right, almonds. Almond. And I still manage to poison you once with almonds. I feel really bad about it.

How did that happen? I don't know. So for listeners, I didn't do it on purpose. I bought him some of those Korean nuts that we'd been talking about in the snack food episode. And they were almonds. So we thought they were okay. But like laced with something else. Yeah, I guess.

I didn't die. Yeah. So that's always a plus. I didn't kill my co-host. Anyway, despite my own, because I'm a journalist dedicated to learning about the truth about the world, I will get over my personal biases against nuts in pursuit of journalistic truth and learning more about how all these businesses work and the chocolate business and all these work, how these work just because I want to learn more about the world, even when I cannot partake of its goodness. I think that is a very worthy cause. The one thing I would say is this is really interesting from just an investment and business perspective, because you have heard every once in a while, people do get really excited about nuts as an investment. And the example I'm thinking of is, remember Michael Burry? Almonds in water. Yeah. His whole thing was invest in almonds because they're so water intensive. It's basically a play on water shortages. I don't think it worked out that well. I think so either. I'm kind of curious.

Yeah, that was like at the end of the big short, that very cryptic ending where they're like, and after betting against the collapse of the U.S. housing market, he has now shifted his attention to almonds. No, no, no, they said water. They didn't even say almonds would have been funnier. Anyway, yes, what can we learn through the medium of nuts? Anyway, very excited to say that we have a couple of guests today who have been doing a lot of work on nuts. A couple of guests, I think we talked to them about five years ago. during the pandemic, they're interested in frontier markets.

They go all around the world looking for interesting opportunities that are off the beaten path. They've been doing some research on the hazelnut industry, and they're based in Dubai. We're going to be speaking with Burton Flynn and Ivan Netunev. They are managing partners at Terra Nova Capital. They scour the world for interesting stories. They're based in Dubai. Burton and Ivan, thank you so much for coming back on Odd Lots. Thank you so much for having us.

Yeah, thanks for having us. I just have like a really simple question. In Dubai, is it just called chocolate? Like, because it's, or do they also specify that it's Dubai chocolate even when it's in Dubai? You know, the original Dubai chocolate is called fixed. And so in Dubai, there's fixed chocolate and then there's the knockoff, you know, other kinds of chocolates. And the fixed chocolate, I didn't know this when I received it as a gift once, actually, about six months ago when the first time I had it. Somebody brought it to my house. They brought me five bars as a gift and we ate them that week. And then later, I found out that these bars go for like $25 a piece.

Oh, that was a good gift. So I did. Yeah, it was. Wait, how much of that is the, um, the cocoa price versus the pistachio price? Because we've seen both of those kind of go up recently. Oh, well, I mean, this, this was before any of that went up, right? So, so this is, this is all just margin based on, uh, marketing, I think, brand. ending. So what do you tell us, generally speaking, besides the fact that you're in Dubai, actually, tell us about the work that you do. We sort of covered it in when we talked to you in 2020, but presumably we have a lot of listeners who haven't listened to that episode. What do both of you tell us, like, how you approach your work, discovering new thing, interesting things around the world? First of all, what we look for at our objective is to find stocks that can double in

12 months. And the way that we do that is we look for basically you guys know growth, GARP investing, right? Growth at a reasonable price. We are not GARP investors. We are growth at an unreasonable price investors. We go out and we look for really huge earnings growth that is being completely misunderstood or or completely overlooked because, you know, what we believe that a good stock, you know, it has to be a good business plus something that's fundamentally misunderstood. So the way that we do this is we approach it from several different angles. One is that on a daily basis, we're looking at insider transactions, basically CEOs buying theirs of their own companies. We find that to be a really strong signal. We also look for

companies that have very good leading indicators to their earnings and we try to monitor those. And then also periodically, we like to reach out to all of the companies we've met. And at this point, we together, Ivan and I have met over 2,000 companies. We've conducted 2,600 meetings in the past six years with both of us in all of those meetings. Most of those were with CEOs. And so we like to reach out periodically and just ask about topical situations that are happening. The most recent one was the Trump tariffs, you know, and understand how it's affecting their business. So we get kind of a global view based on a bottom-up perspective.

So how did nuts actually get on your radar other than, you know, a friend gave you 25 bars of overpriced luxury chocolate? Well, you know, it's an interesting story because we are based in Dubai. So just by definition, we are right in the center of this Dubai chocolate hysteria. Like you see Dubai chocolate bars everywhere in the grocery stores. Then you see them when you order food online. You see them on the billboards. And, you know, sometimes you hear from. people that haven't been in touch for like 10 years and then they message you and all they want

is not not actually even ask how are you doing, but they just want you to ship some Dubai chocolate to them by some express, you know, courier delivery. And, you know, it's fun. A lot of media has written about the Dubai chocolate phenomenon. And I think there was also a claim that Dubai chocolate led to some severe shortages of pistachios and skyrocketing prices of pistachios. which is debatable. But one day we were in the office and we were just joking around and we were saying, look, you know, pistachers are such a kind of a hot niche commodity now. Let's have a look at something else. What about hazelnuts? Because, you know, they're also used in chocolates and so on, even in some of the variations of the Dubai chocolate, the knockoff ones. And we checked kind of the recent news about hazelnuts just to see what's going on with the hazelnuts. And what we found was actually quite, you know, it was really, really, really interesting.

Well, before we actually get to the hazelnut, I'm curious, you mentioned there were these media reports of pistachio shortages or skyrocketing, skyrocketing prices. And then you said, but that's debatable. What actually is happening, you know, I don't know, I don't know. I don't think we have like a pistachio index on the terminal, although I've never actually looked. I think a lot of them come from Iran, which might also complicate things. But, like, actually, what, like, how do you, what is happening in the pistachio market? What has been the effect so far as you can tell from the Dubai chocolate craze to the actual trade in pistachios? Yeah, actually, quite a lot has to do simply with weather.

It's not only the Dubai chocolate demand. But a lot of that has to do with the weather. and just the weather was not favorable enough, and the crop was not good enough. So as simple as that. So because I remember there was one expert on pistachio supply chain, and he was saying that basically there is now so much talk and a lot of media articles claiming that it's all about Dubai Chocolate,

but in reality, Dubai Chocolate doesn't use the raw pistachios. You know, it's a paste, and the paste is very, very diluted. So you don't really need all the pistachial. in the world to produce to buy chocolate. But, you know, if the weather events affect the crop, then of course the price of the commodity will go up. And this is something that also happened to the hazelnuts this year. So it's a supply story more than a demand story for pistachios at least? It could be both. It could be both. But without the supply shortage, there would not be such

severe price appreciation. How did Turkey get into the hazelnut business? Because this is it. seem to have made a conscious decision to actually, you know, nurse this particular type of agriculture. Yeah, it's a long story, which goes back thousands of years. And the situation is that Turkish Black Sea region is naturally the best region in the world to grow hazelnuts. Because hazelnuts need a cool winter. They also need sunny, warm spring, and they also need a rainy summer. And this is exactly what the Turkish Black Sea region gives them. And they've been cultivated in Turkey for thousands of years. So today, there are 600,000 farmers that grow hazelnuts in Turkey.

And there are over 5 million people in Turkey who are in some way involved in the hazelnut farming or trading business. So it's a very, very long history. It just came naturally. It's just where the hazelnuts grow. In a given year, Turkey produces about 70% of all the, the hazelnuts in the world. So the concentration in this industry is huge. It's like 70% of all hazelnuts. So if something happens to the Turkish hazelnut crop, you know, the consequences to

the supply can be severe. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com

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And then what is the exchange process like? I don't know. I assume there's not hazel nut futures. But talk to us about like that process by which the nuts get to the processors and then into an finished product. Yeah. So there's 600,000 farmers. They are quite fragmented.

It's basically some artisan mom and pop farmer shops. And then there are some wholesalers. who buy hazelnuts from the farmers when the harvest time comes around, which is actually next week. And then as wholesalers, they might sell their hazelnuts to the exporters, and then the exporters sell them abroad, or some of these wholesalers, they also act as exporters. So basically, if you compare the hazelnut industry in Turkey to the one in Chile, then the Turkish one is much more old school. It's very small orchards. It's family businesses. It's some standalone farms, whereas, for example, in Chile, it's kind of industrial scale.

And then once a year, this all gets consolidated. The farmers sell their hazelnuts to wholesalers, and then the entire kind of chain starts. It's quite fragmented. And, you know, the quality of the entire hazelnut production in Turkey is lower than in some other parts of the world, because also it's not only the history, it's also kind of the terrain, it's a bit hilly. much harder to have these huge fields of hazelnut plantations. It's a long-standing tradition, and it's very, very hard to bring any innovation into the Turkish hazelnut farming. Okay, so you have a traditional business that's resistant to innovation in an emerging market that is very, very fragmented and also pretty untransparent because it's not like you can

look up a single benchmark for hazelnut prices. How do you deal with, I guess, the opaque of a niche commodity like this when you're evaluating an investment? Well, this is, this is exactly the kind of situation we love, actually, is opaqueness, because it means that it's difficult for others to kind of access, you know, access the information. And so the way we approach it is we try to find primary sources, right? And so in this case, we have had the opportunity to talk to the world's largest hazelnut processing company and basically understand the market situation from them, you know, and then kind of collaborate this with other sources that we find and, you know, continue to ask them questions

to understand the market situation. But, you know, it's possible that we might be the, you know, some of the world's best experts on Hazel nuts, even though we didn't know anything about them two months ago. So what do you look at in terms of just pricing? There is pricing. It's not something you can pull up on Bloomberg. So basically when we were talking to the COO of this hazelnut operating operator, he said that, you know, it's basically a price that is called on the phone. I mean, this is like old school trading, you know, practices. There are no hazelnut futures. It's nearly impossible to trade hazelnuts, you know, through any agricultural exchanges. And it makes this market so inaccessible that it's very hard.

It's very hard for a regular investor to play it. I mean, I think the only way to play the hazelnut market is probably through this only listed public, like the only publicly listed hazelnut processing company in the world. And it's listed in Turkey, which also is not so easy to access. But when it comes to hazelnuts themselves, it looks like you just need to find the party that can sell this hazelnuts. and you just buy the bags, the tons of hazelnats, but you also need to find the transportation, you need to find the storage,

and then you need to find a buyer when you want to sell. So it's a very difficult one to access. They say abs are made in the kitchen. Cool, but who has time for three hours of meal prep and a fridge full of Tupperware? That's why I started using Factor. Factor delivers fresh, never frozen, ready-to-eat-eat meals that are dietitian designed

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Listen to Leading by Example, executives making an impact on the IHeart Radio app, Apple Podcast, or wherever you get your podcast. Something I'm interested in, you know, this idea of they're not having been much productivity gains in the actual farming of hazelnuts. And I'm sort of fascinated by the degree to which different commodities inherently lend themselves to varying levels of mechanization in production, right? And so, you know, you could have competitively priced wheat that's grown in America, competitively priced wheat that's grown in Russia, competitively priced wheat or corn that's grown in Brazil, all because there's very little labor involved. You have like one combine out there on a giant field. And then you have other commodities that are inherently labor intensive because it's not so easy to automate. What have you seen, you know, as you have gone around the world to frontier, various frontier markets, the sort of range by which some commodities lend themselves to productivity gains and some don't? For example, in this hazelnut industry, right, we can look at Turkey, which we discussed, it's artisanal. And then we can look at something like Chile.

So by nature, Chile is not necessarily the best place for growing hazelnuts because it doesn't have enough moisture. However, if you manage to provide enough irrigation, then you solve that issue. So in Chile, for example, you can grow hazelnuts with a much, much higher yield. than in Turkey. You can have huge plantations of hazelnuts. You provide irrigation and then you can get probably five, six times more hazelnuts per hectare of land than in Turkey. And this is all this is something that started happening in the last several years. And the projection is that Chile will become the number two producer of hazelnuts in the world in about seven to 10 years with a production capacity of 200,000 tons a year, which still, compared to

the Turkish supply capacity of 800,000 tons a year is quite small. And this just kind of underlines the sheer importance of the Turkish market for hazelnut business. Do you have any idea why chili decided to go in on hazelnuts? I'm just very curious about how they make these decisions because, you know, it's not necessarily a completely natural crop, as you pointed out, Chile doesn't have, you know, that much rainfall, and so they have to do something in order to foster this industry. Why did they decide on hazelnuts in particular? The initiative comes from the bottom up. So, for example, this largest hazelnut processor that's based in Turkey, they decided to expand in Chile, right?

So it wasn't kind of Chilean government initiative. It was kind of the corporate initiative because they looked at many different countries. They looked at New Zealand, where it's more hilly, which would be more difficult. They looked at Latin America. And in Chile, there is this great culture of growing agricultural commodities. It's industrialized. It's possible to make it large scale. And they just needed to add irrigation, and that would be it.

The other thing is that it provides a very nice diversification for them, right? because as we're talking about, there was a huge weather event that disrupted the supply in Turkey. Turkey is the vast, vast majority of the production. So for them to have, you know, the crop in an entire different hemisphere, you know, with different conditions, provides, you know, provides some sort of diversification. What do you tell us about that weather event specifically, since this seems to be central to your interest? How big of a deal is it? Is it a one-off? And second of all, like, give us the overall sort of supply demand imbalance that you analyze right now for the hazelnut market.

Every about 10 years, there's a big frost that happens in Turkey. So the previous ones happened in 2004 in 2014. And this year, there was a very, very major frost in April, which destroyed one third of all Turkish hazelnuts. Basically, in a few days, one third of the entire crop was destroyed. And frost like this, as I said, they happen once every 10 years. They are quite one-off. But the thing is that this year, Turkey had a very, very warm spring. So the hazelnut trees started developing much earlier.

And then when the frost happened, they were exposed to this huge risk. And they got damaged really badly. Now, this is one thing. So the frost destroyed one third of the Turkish hazelnut crop. The second thing is there's another kind of small little creature named the marmarated brown, the brown marmarated stink bug, which only settled in Turkey in 2017, but it has become so widespread that in a given year it can destroy from 10 to 20% of the entire hazelnut crop in Turkey. So we read some academic research about it.

It was fascinating. So on top of the frost, you also have the sting bug. But then that's not the entire story. Then there's also the heat. And in the western Black Sea region in Turkey this year, the summer was the worst summer in the last 65 years. The hottest, the driest summer. And what does it mean? It means that the hazelnuts that did survive the frost, that did survive the stink bug,

they will not develop as well as they should have because they need moisture. The nuts, the kernels, they need the moisture. But without the moisture, without the water, with this huge, like, dry, hot weather, they will be damaged. They will be underdeveloped. Some of them won't develop at all. So just to give us some numbers. So the expectation for this year's crop was 768,000 tons of in-shell nuts in Turkey.

Now, after the frost, after the stink bug impact, and after the heat, the Ministry of Agriculture in Turkey now essentially. estimates this year's crop to be at around 450,460,000 tons, which is about 40% lower supply than expected. This is for the in-shell hazelnuts. Now, kind of going back to this heat, if you look at the kernels, then the kernels will be impacted even more. So last year, for example, the yield, which is measured as the proportion of the weight of the kernel to the weight of the entire hazelnut was 48%. This year it will be much lower. So the actual hazelnut kernels, which is what's important,

will probably be in shortage by about 45, up to 50% this year. So now the entire Turkish crop might suffer by 45% this year, which means the entire global crop of hazelnuts might suffer by 35%. And the demand for Turkish hazelnuts is 300,000, is 320,000 tons for the export and 70,000 tons for the domestic use. So 390,000 tons of kernels. This is kernels. And the production of kernels this year in Turkey will probably be half that.

So we're looking basically at a supply which will be half of the demand. Joe, I have to say that I am unfortunately very familiar with marmorated brown stink bugs because they've made their way to New England too. Oh, really? Yeah, they're invasive there too. And in the winter, they really like to crawl into old houses. And they really smell, huh? If you scare them, they smell.

Okay. Or if you kill them. And they just sort of fly around and make a lot of noise. Anyway. Okay, the thing I don't quite get about this particular investment, I guess I understand there's a shortage, a potential shortage of hazelnuts, and that could translate into higher wholesale prices. But how does that actually feed into higher prices or profits for the hazelnut processor,

who I assume has to pay the higher prices on the wholesale end? And then maybe they can charge higher prices for the retail end. But, you know, it's not guaranteed that that margin's going to go up. Well, first of all, they have some inventory, which they have built over the past season. And the thing is the processor applies mathematical models. and weather pattern prediction models to manage their inventories. So this year, when there was a very, very warm winter and early spring, they knew that if some kind of frost happens, it doesn't have to be a severe frost

because the hazelnuts already developed quite a bit. So if something happens, then the damage will be severe. So they managed to increase their inventory, right? This is one thing. The price in the market, of course, will go up a lot. We looked at the previous frosts in 2004 and 2014. So the prices for hazelnuts went up about three and a half four X from just before the frost to about one year later. Right. So if you have inventory and if you hold on to it and then you kind of sell it later, you make some profits.

But also even when you buy from the farmers and when there's this shortage of hazelnuts in the world, you can command higher margin. and the buyers will have to pay it, you know, because they have no other option. The inventory reported on their Q1 financial report was $164 million, which is, I think, something like a third of their market cap. And that's, you know, that's before the increase in prices. What is the structural demand story for Hazelnuts? So, again, we're talking, you know, with the pistachio question, we know that whether it's the demand that's driving the price or the supply, we know that demand has been booming.

Maybe the Dubai chocolate trend will fizzle out at some point. But for, we don't know, but for hazelnuts, what is the long-term structural demand outlook look like? Because we already have hazelnut chocolate, which is already a staple of my diet. And it's already been huge. And Nutella has been a staple of the internet and people talking about it and the culture for a long time. Is it rapidly growing still? Has it plateaued? What's happening there?

It's not growing rapidly, but it's still growing. For example, from 2014 until now, the demand for hazelnuts went up more than 30% overall. So I would say it's probably like a 2, 3% a year growth, which is still there. So it's slow, but it's going up. And you mentioned Nutella. I just wanted to mention very interesting fact. So Ferreiro, Ferreira buys a quarter of the entire global hazelnut supply every year. So it sounds really fascinating, you know, that one single kind of entity just buys the quarter of the entire supply.

So one of the really interesting things, I think that's been happening in the world, certainly since 2020, is this idea of overlapping emergencies. That's Isabella Weber's term. But this idea that, you know, something dramatic always seems to be going on and it always seems to be sparking some sort of shortage. And we've certainly seen that in the world of commodities. and I can rattle off a bunch of, you know, pretty like niche ones that have had some sort of supply squeeze. So cocoa, obviously, orange juice, wheat during Ukraine, Russia, hazelnuts now, maybe pistachios earlier. Would you expect as more of these happen for those markets to become maybe more financialized or maybe more easy for investors such as yourselves to invest in? Well, I don't know about it making it easier to invest in, but I think that these kinds of events

create huge opportunities. You know, you mentioned Coco. Coco's really interesting because this is actually something that we studied last year. We came across a stock, which is one of the only stocks that you can sort of play Coco, and it's listed in Malaysia, and it's, you know, it doesn't have massive liquidity, but it has has sufficient liquidity. And we had noticed last year, of course, there was a weather event that caused the cocoa supply to drop by about 14%. You know, this is because in West Africa, they produce 70% of the global cocoa supply. You know, we started looking at potential plays on cocoa.

By the time we found this stock that we looked at, it had already played out. But what we did was we created a case study to understand kind of how this timing worked out. What we found is actually that the cocoa prices increased several months before the stock price had increased. So again, it's another case of kind of an obscure company that people weren't really watching, even though there's sort of an obvious play. The other really interesting thing that we noticed about this company is we looked at the insider buying disclosures and the CEO and the,

the management were buying like crazy, the stock leading up to or, you know, kind of as as the weather event and the cocoa supply situation was developing. So I'm not sure about, you know, providing better access, but I think that these sorts of global events, you know, can provide really huge opportunities if you, you know, if you kind of do the work, right? But for Coco, I mean, you could just go out and buy a future, right? Or I think there's even a Cocoa ETF now. Why not just do that? Is that because your expertise is sort of in single stock businesses or you don't want to become a commodity player? We're not top-down investors. We're very much bottom-up investors. And so, you know, so when something like this is happening, of course, you can play the trend of the, you know, the cocoa price itself. But that, you know, that's obviously going to also depend on kind of the market dynamics. What we find is that there's bigger opportunities in, in sort of a, you know, second order, which is a cocoa company that's going to benefit from these prices.

They're earnings, but the earnings lag, you know, a quarter, two quarters. And the stock really gets rewarded when, you know, when they start producing the earnings, at least in these sorts of markets. You know, that's why we see this as a more interesting way to play it than just writing the, you know, the trend of the futures prices. Can you talk, you know, you mentioned finding a random cocoa. company in Malaysia and the due diligence work you have to do reaching out to management. Can you talk about the state of essentially IR in frontier markets, right? We go to a website like an American

big company, like a Pepsi or something, and they have this incredibly full IR page that has, you know, their presentations and the number of the, you know, the main person and all their earnings, et cetera. How varied is the quality of IR in the markets that you look at? hugely varied. And so in the case, you know, in the case of this hazelnut processor, they only have investor relations materials basically in Turkish, which is, you know, of course, you can, you know, if you do the work, you can, you can translate this stuff easily these days. But, but, you know, what we found over the years is that some companies have very good investor relations practices and some don't. And we've selectively taken opportunity to basically

teach companies how to improve their investor relations practices. Basically, we give them free consulting after they've become portfolio companies on basically best practices on investor relations. What we've seen is that some companies have been highly willing to engage with us to improve their investor relations practices. Other companies have, kind of shied away from it. And, you know, we actually looked at the, the results of companies that we engaged with. And we found that the companies that were willing to engage with us were three times as likely to see their stock prices double in the 12 months following our engagement than other stocks that we had bought in our portfolio. So it could be on the one hand that these recommendations are

very valuable that companies now, you know, are going out to the market and sharing how great their businesses and investors are learning about that. Another, you know, another explanation could be that it's a feedback loop and that, you know, companies that have really great things to tell are the companies that, you know, are happy to go out and talk to the market, whereas, you know, if they really don't have great things coming down the pipeline, they don't really want to go out and make a lot of noise. Yeah, Tracy, I had a friend of mine, this was like 20 years ago, et cetera, but he was engaged in some forms of like frontier market investing. And he thought there was like a pretty big alpha opportunity in essentially doing exactly what Burton just described.

I think he once told me about, I don't know, some company that owned a lot of gas stations and Laos or something like that. And the opportunities that it's like, can I just like help you build out your IR page? Because your financials are really compelling. And it was nobody, nobody even knows about them or could figure it out even if they wanted to. Did it work? I don't know, but it seems like an interesting idea. Okay. So if we look at the past 2014 frost, the past precedent,

how long did that actually have an impact on prices? Or how long did it take for hazelnut prices to normalize? So what happened in 2014, the price started going up in March, 2014, right after the frost, when the degree of destruction became clear. And then it reached its peak at the end of April, early May 2015, so the following year. And then by that time, usually it's quite clear if the new crop of the new year will be substantial or not. So in that case, it was quite a good crop. And the prices started going down quite quickly. So the price went up over three and a half X from March,

2014 to May 2015. And then it dropped, I would say, about 50% in just one, one and a half months. have time to buy Nutella before the big price spike. Yeah, you know, when we looked at it, so first there is like a 30% spike from the time of the frost till August when the harvest starts. And then from August to late April, there is kind of the most of the price increase happens in that time frame. I just have one last question and is inspired by a tweet I saw yesterday from the Chinese embassy in the U.S. And they're talking about the de-desertification that they're doing in China, essentially turning desert into arable land.

And I'm curious what you're seeing, if that's something that you're thinking about. I mean, we're so used to talking about disruption coming from China from a manufactured standpoint. But in terms of its own, I mean, it has a lot of land. Much of it historically has not been arable. They're trying to reverse that, which you can obviously do if you have sufficient access to irrigation technology. and electricity, et cetera. When you look out in the long-term hazelnut supply story, you mentioned Chile growing, is this going to be a big story and more? Is this a story that you're thinking about in ag markets, whether hazelnut or general China turning itself into a sort of a man-made bread

basket? Everything is possible, but it's a very, very long-term top-down trend. So our job is, We are emerging markets investors traveling the world in search of hidden gems through bottom up opportunities. So I mean, it's possible, but again, it's a very long-term, top-down sort of trend. And as I mentioned, Chile might produce double the number of hazelnuts they do today in 10 years, but then who knows what's going to happen to the weather patterns in Turkey in 10 years? Because it looks like, you know, the winters are becoming warmer and the summer sometimes are becoming drier and hotter, and I think the predictability is getting worse.

Burton and Ivan, thank you so much for coming back on Oddlots. I've learned a lot about hazelnuts, which I didn't know about, and I hear they're good, but I still don't know. You have to take our word for it. I can't taste them, but at least I know something about them now. To us, hazelnuts taste much better than to buy chocolate. Okay. At least it's much healthier.

All right. Well. Yeah, thank you. Tracy, I think your invocation of overlapping emergencies is really apt. Like, we're going to be doing a lot of these episodes in the future about all kinds of niche commodities over the years. It does feel like that. And there are some technological solutions that I guess can help at the margins. But even in that conversation, Burton and Ivan were talking about, you know, this Turkish processor.

They have weather technology. So they had an early sign that the hazelnuts had grown, you know, big early, which made. them susceptible to a potential frost. And so they started building up their inventory and then, lo and behold, the frost hit, and they're in a relatively good position. That's good for them. But it doesn't expand the absolute supply of hazelnuts, right? Yeah.

I feel like ag tech is like a really interesting story. You know, we did that episode with the Lentil King of Saskatchewan several months ago. And I feel like there are sort of two different things because farmers in any country, as he noted, are always going to be among the politically most protected class. Politicians feel some sort of obligation to protect farmers almost always. On the other hand, like any other good, you know, there's going to, at least in theory, be opportunities for genuine productivity gains. And if Chile is stronger at irrigation, et cetera, it'll be interesting to watch the sort of like interplay between like technology that gets applied to growing anything,

cultivating anything, including in Chile and maybe in the future in China versus the political desire and sort of legacy producers to, you know, protect the small artisan farmer on the hillside. Yeah, that's right. There is that tension and it becomes more prominent, the more overlapping emergencies that we see. I think the problem for a hazelnuts is that they're brown and they could, it's just never going to go viral the same way because it just does not, that green, the pistachia, whether it's in chocolate or now, you know, you see them a lot. more like on top of a croissant shredded up, et cetera. Like, that's just made for 2025 in a way that a hazelnut isn't. Also, sorry, but hazelnut chocolate is already a classic. No, yeah, that's too, right. Like, it's mature.

Maybe someone can come up with green hazelnuts. Yeah, genetic engineering. Yeah. That's the next frontier of viral chocolate making. Genetically engineered nuts. Better looking produce. I mean, that really is going to be the key, right? Unironically, any piece of produce that photographs well, et cetera, is going to be big.

I mean, this is why people drink macha. Glitter-infused, hazelnuts. Okay. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

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