Odd Lots Podcast Summary: "The Investors Who Think Hazelnuts Will Be the Next Pistachios"
Release Date: August 14, 2025
Hosts: Joe Weisenthal and Tracy Alloway
Guests: Burton Flynn and Ivan Netunev, Managing Partners at Terranova Capital
Introduction
In this engaging episode of Bloomberg's Odd Lots, hosts Joe Weisenthal and Tracy Alloway delve into the intriguing world of hazelnuts, exploring why some investors believe hazelnuts could become the next big opportunity similar to pistachios. The discussion is enriched by insights from Burton Flynn and Ivan Netunev, managing partners at Terranova Capital, who specialize in uncovering unique investment opportunities in frontier markets.
From Pistachios to Hazelnuts: Shifting Investment Focus
The episode begins with a light-hearted conversation about personal experiences with different chocolates, setting the stage for a deeper exploration into the hazelnut market. Tracy Alloway emphasizes the cultural significance and widespread love for hazelnut-based products, particularly highlighting their role in popular items like Nutella.
Notable Quote:
"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."
— Tracy Alloway [01:25]
Joe Weisenthal introduces the idea that despite the popularity of hazelnuts, they are often overlooked in investment discussions compared to other nuts like pistachios.
Terranova Capital's Investment Strategy
Burton Flynn and Ivan Netunev explain their approach to identifying investment opportunities. Their strategy centers on Growth at an Unreasonable Price (GARP), where they seek companies with significant earnings growth that are misunderstood or overlooked by the market.
Notable Quote:
"We look for really huge earnings growth that is being completely misunderstood or completely overlooked because we believe that a good stock has to be a good business plus something that's fundamentally misunderstood."
— Burton Flynn [07:38]
They emphasize a bottom-up approach, conducting extensive research, monitoring insider transactions, and engaging directly with CEOs to uncover promising investments.
The Dominance of Turkey in Hazelnut Production
A significant portion of the episode focuses on Turkey's role in the global hazelnut market. Ivan Netunev provides a historical perspective, highlighting that Turkey produces about 70% of the world's hazelnuts through a highly fragmented system of 600,000 farmers.
Notable Quote:
"Today there are 600,000 farmers that grow hazelnuts in Turkey, producing about 70% of all hazelnuts worldwide."
— Ivan Netunev [13:58]
They discuss the traditional farming practices in Turkey, which rely on small, family-owned farms that lack large-scale industrialization, making the market both resilient and susceptible to disruptions.
Challenges in the Hazelnut Supply Chain
The discussion shifts to the various challenges facing the hazelnut industry in Turkey, primarily focusing on weather-related events and pest infestations.
Impact of Weather Events:
Ivan Netunev details a devastating frost that occurred in April 2025, which destroyed approximately 40% of the expected hazelnut crop. This event significantly impacted global supply, reducing it by about 35%.
Notable Quote:
"This year, the Ministry of Agriculture in Turkey now estimates this year's crop to be at around 450, 460,000 tonnes, which is about 40% lower supply than expected."
— Ivan Netunev [24:27]
Pest Infestation:
They also discuss the brown marmorated stink bug, an invasive species that has been causing substantial damage to hazelnut crops since settling in Turkey in 2017.
Notable Quote:
"There's another kind of small creature named the brown marmorated stink bug, which... can destroy from 10 to 20% of the entire hazelnut crop in Turkey."
— Ivan Netunev [24:27]
These challenges highlight the vulnerability of the hazelnut supply chain to environmental and biological factors.
Investment Implications of Supply Shocks
The conversation explores how supply disruptions translate into investment opportunities. With a reduction in supply and consistent demand, hazelnut prices are poised to rise, benefiting processors and investors who can strategically manage inventories.
Inventory Management:
Ivan Netunev explains how hazelnut processors utilize weather prediction models to manage their inventories, allowing them to capitalize on price spikes.
Notable Quote:
"The processor applies mathematical models and weather prediction to manage their inventories... If you have inventory and you hold onto it and then sell it later, you make some profits."
— Ivan Netunev [28:57]
Price Dynamics:
Historical data from previous frosts show that hazelnut prices can increase by 3.5 to 4 times before stabilizing, presenting significant profit margins for those with strategic inventories.
Demand Trends and Market Drivers
Despite challenges, the demand for hazelnuts continues to grow steadily. Ivan Netunev notes a 30% increase in demand since 2014, with an annual growth rate of 2-3%.
Major Buyers:
A crucial player in the market is Ferrero, which purchases 25% of the global hazelnut supply annually for products like Nutella.
Notable Quote:
"Ferrero buys a quarter of the entire global hazelnut supply every year."
— Ivan Netunev [31:04]
This significant demand from major corporations underscores the importance of hazelnuts in the global confectionery industry.
Comparisons with Other Commodities: The Case of Cocoa
Burton Flynn draws parallels between the hazelnut market and other commodities like cocoa, discussing how supply shocks can create lucrative investment opportunities. He highlights that companies adept at managing these disruptions can see their stock prices soar as commodity prices spike.
Notable Quote:
"These sorts of global events can provide really huge opportunities if you do the work right."
— Burton Flynn [34:19]
Future Outlook and Agri-Tech Innovations
Looking ahead, the guests discuss potential shifts in global hazelnut production, particularly the emergence of Chile as a significant producer. Ivan Netunev projects that Chile could become the second-largest hazelnut producer within the next decade, thanks to advancements in irrigation technology and large-scale agricultural practices.
Notable Quote:
"The projection is that Chile will become the number two producer of hazelnuts in the world in about seven to ten years with a production capacity of 200,000 tons a year."
— Ivan Netunev [23:03]
Agri-Tech Potential:
There is a discussion about the role of agricultural technology in increasing productivity and mitigating supply chain vulnerabilities. However, challenges remain due to the fragmented nature of farming in key regions like Turkey.
Conclusion: Navigating a Complex Market
The episode concludes with reflections on the interplay between supply disruptions, demand growth, and investment opportunities within the hazelnut market. Joe Weisenthal and Tracy Alloway emphasize the importance of thorough research and strategic inventory management in capitalizing on niche commodity markets.
Notable Quote:
"Any piece of produce that photographs well, et cetera, is going to be big. I mean this is why people drink."
— Joe Weisenthal [44:16]
Key Takeaways
- Turkey's Dominance: Produces 70% of the world's hazelnuts through a fragmented system of small farmers.
- Supply Challenges: Weather events and pests like the brown marmorated stink bug significantly impact supply.
- Investment Opportunities: Strategic inventory management and understanding supply-demand dynamics can yield substantial profits.
- Growing Demand: Steady increase in global demand, driven by major consumers like Ferrero.
- Future Production Shifts: Potential rise of Chile as a significant hazelnut producer through agri-tech advancements.
This detailed exploration provides listeners with a comprehensive understanding of the hazelnut market's current landscape, challenges, and investment potential, highlighting why hazelnuts may indeed be the next big opportunity in niche commodity investing.