Motley Fool Money Podcast Summary: "The Global Cold Rush"

Release Date: June 30, 2024

Hosts: Dylan Lewis, Ricky Mulvey, and Mary Long
Guest: Nicola Twilley, Author of How Refrigeration Changed Our Food, Our Planet and Ourselves and Co-host of Gastropod

In this episode of Motley Fool Money, host Ricky Mulvey engages in an enlightening conversation with Nicola Twilley, delving deep into the expansive world of refrigeration and its profound impact on our global economy, food supply chains, and investment opportunities. Titled "The Global Cold Rush," the episode uncovers the intricate dynamics of the artificial cryosphere, the challenges of maintaining perishable goods, and innovative investment strategies inspired by everyday household behaviors.

I. The Artificial Cryosphere: Growth and Impact

Nicola Twilley introduces the concept of the artificial cryosphere, distinguishing it from Earth's natural cryosphere, which includes ice caps, glaciers, and polar regions. She highlights the rapid expansion of artificial cold storage facilities, noting that "it's already at over 5 billion cubic feet and grew 20% between 2018 and 2020" ([02:23] Twilley). This surge occurs concurrently with the shrinking of the natural cryosphere, underscoring a significant shift in how humanity preserves and distributes food.

II. Inside the Cold Chain: Working in Refrigerated Warehouses

Twilley shares her firsthand experience working in Americold, the second-largest refrigerated warehouse provider globally. She vividly describes the extreme cold conditions, stating, "It's really cold. Once your toes and your nose and your fingers get cold, it's all over" ([03:50] Twilley). Despite the harsh environment, she emphasizes the camaraderie among workers, saying, "My co-workers were really the best part of working in the cold" ([05:32] Twilley). However, she also highlights the physical and logistical challenges, including the difficulty for those who wear glasses or grow facial hair, and the increased likelihood of getting sick due to lower body temperatures affecting the immune response.

III. The Intricacies of Handling Ice Cream

A significant portion of the discussion centers on ice cream's unique challenges within the cold chain. Twilley explains, "Ice cream is well known for being one of the trickiest items you can handle in the cold chain" ([08:48] Twilley). She breaks down the complexities:

• Air Content: Non-premium brands like Breyers contain about 50% air, leading to logistical issues such as overflow or shrinkage during transportation, especially over varying elevations.

• Premium Brands: Companies like Ben & Jerry's avoid stabilizers and emulsifiers, relying solely on cold chain integrity to prevent crystallization. Any temperature fluctuation can ruin the product's texture, making transportation delicate and expensive.

These factors contributed to Unilever's decision to spin off its ice cream division, recognizing the high costs and complexities involved in maintaining product quality.

IV. Walmart's Strategic Cold Chain Domination

Twilley and Mulvey explore how the cold chain has been pivotal in Walmart's rise to grocery dominance in the United States. Twilley explains, "When Walmart decided to go into the perishables business, they hired grocery store experts and meticulously planned their distribution strategy" ([12:34] Twilley). By establishing distribution centers within a 250-mile radius of their stores, Walmart ensures efficient stocking and minimizes costs. This strategic localization contrasts with competitors like Whole Foods, which cannot achieve the same efficiency due to fewer stores within the critical distribution radius, leading them to outsource and incur higher costs.

V. The Ongoing Expansion of the Artificial Cryosphere

Despite refrigeration being a mature industry, the artificial cryosphere continues to grow. Twilley attributes this to several factors:

1. Geographical Expansion: The Panama Canal expansion has spurred new refrigerated warehouses along East Coast ports (e.g., South Carolina, North Carolina, Florida) to reduce dependency on West Coast ports affected by stricter regulations.

2. E-commerce Growth: The rise in on-demand grocery delivery services necessitates more localized distribution centers to meet the demand for rapid delivery times.

3. Labor Challenges: With fewer individuals willing to work in cold environments, there's a shift towards automation. Twilley describes automated cold storage facilities as "several stories high" with advanced systems that replace human labor, albeit introducing new technological complexities ([15:31] Twilley).

These trends ensure that the artificial cryosphere remains a dynamic and growing segment of the global economy.

VI. Innovative Investment Strategies: Tassos Stasopoulos’ Fridge Analysis

A standout segment features Twilley discussing Tassos Stasopoulos, an investor who leverages insights from household fridges to inform his investment decisions. Twilley explains, "Tassos runs an investment firm based in London, and his whole investment strategy is based around looking in people's fridges" ([18:30] Twilley). By analyzing the contents of fridges in emerging markets like India and Indonesia, Stasopoulos identifies rising consumer trends as populations ascend to middle-class status. For instance:

• In India, the presence of "yogurts, butters, cheeses, and processed dairy" signals growing demand in the dairy sector.

• In China, observing a shift from fast food buckets to "green curry and probiotic yogurt" indicated a move towards healthier and more international food preferences, prompting Stasopoulos to divest from companies like Yum China.

This ethnographic investment approach provides a unique lens for predicting market shifts based on tangible consumer behaviors.

VII. Economic Stress and Food Behavior: Insights from William Rathji

Twilley and Mulvey delve into research by William Rathji, a garbologist who studies food waste through trash analysis. Twilley notes, "Under economic stress, people buy more perishable foods and throw away more food" ([23:24] Twilley). This counterintuitive behavior is attributed to a hoarding mentality, where individuals stockpile food as a safety mechanism against scarcity and uncertainty. A decade-long UCLA study corroborates this, revealing that households under economic or lifestyle stress tend to "cram their fridges and freezers," leading to increased food waste as stored items eventually spoil ([23:24] Twilley).

VIII. The Economics of Bananas in the Grocery Store

Addressing a seemingly simple question, Twilley explains why bananas remain one of the cheapest fruits in grocery stores. She states, "Bananas are a loss leader, representing 10% of everything that goes across the supermarket scanner" ([26:47] Twilley). As America's most popular fruit, maintaining low prices attracts customers and stimulates overall store traffic. Additionally, the historical commercial refrigeration of bananas by companies like the United Fruit Company revolutionized their accessibility and affordability. However, Twilley hints at potential future price increases due to legal and ethical repercussions faced by banana-exporting companies for past exploitative practices in Central America ([26:47] Twilley).

IX. Future Trends in Refrigeration and Produce Quality

Looking ahead, Twilley expresses excitement about innovations that could replace traditional refrigeration while enhancing produce quality. She highlights companies like Appeal, which has developed a nanoscale coating from food waste materials. This coating regulates the exchange of oxygen, carbon dioxide, and moisture, effectively preserving produce at room temperature without sacrificing flavor or nutrients. Such advancements could lead to "better-tasting and more nutritious produce" while reducing dependence on energy-intensive refrigeration systems ([28:45] Twilley).

Additionally, Twilley connects this to the rise of GLP drugs like Ozempic, which increase consumer appreciation for fresh, flavorful produce. This shift in consumer demand could drive further innovation in the refrigeration and produce industries, aligning better with health and taste preferences ([28:45] Twilley).

X. Conclusion and Recommendations

The episode concludes with Twilley's recommendation of her book, "Frostbite," and her podcast, Gastro Pod, both of which offer deeper insights into the intersections of food, technology, and society. Mulvey emphasizes the episode's value in understanding the global cold rush and its significant implications for investors and consumers alike.

Notable Quotes:

• Nicola Twilley [02:23]: "I ended up calling it the artificial cryosphere to distinguish it from Earth's natural cryosphere."

• Nicola Twilley [03:50]: "It's really cold. Once your toes and your nose and your fingers get cold, it's all over."

• Nicola Twilley [08:48]: "Ice cream is well known for being one of the trickiest items you can handle in the cold chain."

• Nicola Twilley [12:34]: "When Walmart decided to go into the perishables business, they hired a bunch of grocery store people and figured out how to do it."

• Nicola Twilley [15:31]: "The amount of refrigerated space in the US is still expanding because of these shifts in logistics chains, in how Americans demand their food and in where Americans are willing to work."

• Nicola Twilley [18:30]: "Tassos runs an investment and an asset management firm based in London, and his whole investment strategy is based around looking in people's fridges."

• Nicola Twilley [23:24]: "Under economic stress, people buy more perishable foods and throw away more food."

• Nicola Twilley [26:47]: "Bananas are a loss leader, representing 10% of everything that goes across the supermarket scanner."

• Nicola Twilley [28:45]: "I'm really excited about alternatives to refrigeration and how much better our produce could taste."

Final Thoughts:

"The Global Cold Rush" masterfully intertwines the complexities of the cold chain with broader economic and societal trends. For investors, understanding these dynamics can unveil unique opportunities, while consumers gain a deeper appreciation for the technologies that bring fresh, affordable food to their tables. Nicola Twilley's insights shed light on an often-overlooked aspect of our daily lives—the intricate dance of refrigeration that sustains modern food systems.

For those interested in exploring these themes further, Twilley's book "Frostbite" and her podcast Gastro Pod come highly recommended, offering rich narratives and analyses on food, technology, and their intertwined futures.