

Going hazelnuts in Turkey: We call a frenzy crazier than Dubai chocolate
Burton Flynn and Ivan Nechunaev
June 2025




Ship me some Dubai chocolate!
Based in Dubai, we are by definition right in the center of the Dubai chocolate hysteria. We see Dubai chocolate bars in grocery stores, stumble upon them when ordering food online, subconsciously absorb these pistachio-filled gastronomic sins from the billboards, and deliberately consume them in our homes. Sometimes we hear from our so-called friends from all around the world who haven’t been in contact for years: all they want from us is to tell them all we know about Dubai chocolate, in extreme cases demanding that we ship some to them to the US or Australia via express courier delivery. Nom-nom.
Such is the Dubai chocolate craze that reputable business media including the Financial Times recently published articles claiming that the extreme demand for Dubai chocolate has led to a supply crunch and doubled the price of pistachios in Turkey, which produces a third of the entire global supply of pistachios.
We are not convinced that the TikTok-fueled Dubai chocolate phenomenon can alone cause severe pistachio shortages and extraordinary price action – after all, weather also plays a role. However, the relentlessly curious investors we are, on a recent hot, mind-melting day in Dubai, we laughingly thought that not only pistachios but also other nuts – such as hazelnuts – make their way from Turkey into chocolate bars (including some knock-off variations of the Dubai chocolate). And so we decided to check the news about hazelnuts – mostly for fun – who knows, maybe there is a shortage of hazelnuts, too?!

We are going into curiosity overdrive
Our curiosity urge turned out to be extremely timely. A desktop search revealed a few local media sources in Turkey reporting that earlier this year – in mid-April – there was a devastating once-in-a-decade frost in the Turkish Black Sea region, which damaged at least 30% of the country’s hazelnut crop.
We realized that if Turkey – which absolutely dominates the hazelnut market by producing nearly 70% of the world’s entire supply of hazelnuts – loses a third of its harvest, then a quarter of all hazelnuts in the world will perish. Such a dramatic decrease in hazelnut availability could create severe supply shortages and quickly drive up hazelnut prices to a streak of record-highs, just as Nutella and chocolate bar producers scramble for any hazelnuts they can get (and Nutella's parent buys a quarter of entire global supply of hazelnuts every year).
We studied the matter further and found a precedent: last time a frost of comparable caliber happened in Turkey was in 2014 – it destroyed over 30% of the year’s hazelnut crop (same as this time), and the hazelnut price tripled (3x!) afterwards.
Researching that epic 2014 freeze deeper, we were surprised that while it occurred in the month of March, it took until August – a long five months! – for Bloomberg and other major global media to finally report the hazelnut shortage for the first time (through the lens of higher Nutella prices). By then, the hazelnut price had already gone up +90%, from $7 to $13 per kilogram! It then took another nine months for the hazelnut price to increase an additional +60%, peaking at $21 per kilogram in May 2015. It was clear to us: the biggest gains were made before the news hit the headlines.


Will Bloomberg be late to the game?
Switching back to the 2025 frost crisis, we found that the hazelnut price had already started moving up in the agricultural markets – from $9 to $12 per kilogram in the several weeks since mid-April. However, neither the frost impact nor the early hazelnut price action has been reported by the global news outlets yet – for example, there has been no Bloomberg coverage of the hazelnut market pressures. It didn't surprise us: Bloomberg first reported the Malaysian medical glove bonanza on April 21, 2020, six weeks after the covid pandemic was officially declared, and two months after we had already identified an extreme supply and demand mismatch and invested in a glove stock that delivered +1,400%.
If the 2014 frost precedent is any lesson, we assume it will take another couple of months until various mainstream business media start reporting the hazelnut supply squeeze in unison (unless this write-up of ours provokes them to do so earlier* – see footnote at the end). Perhaps around mid-August the “unexpectedly” high Nutella prices will be in the news again. But so far, the hazelnut market imbalance has not yet caught the attention of major media – and thus also global investors and speculators – keeping the hazelnut price dynamics at mild levels.
This lack of broad public awareness of the sheer tragedy in the hazelnut supply theater clearly implied an early chance for intellectually curious astute investors to load up on delicious Turkish hazelnuts (known locally as fındık) before the journalists and the markets processed the situation and the hazelnut price skyrocketed. Intrigued, we started to contemplate how our fund could take advantage of this opportunity.


Trade of the year
Of course, hazelnuts are a highly niche market – and the lack of interest by the major media or investors is a testament to this obscurity. Hazelnuts are not traded in huge volumes like sugar or wheat on the largest global commodity exchanges, and even the professional trustworthy data about hazelnut prices is only available from boutique agricultural data providers charging subscription fees. As such, finding a convenient opportunity to invest in hazelnuts through financial markets seems a herculean task – and even if it were possible through smaller specialized commodity exchanges, our fund would still not have been able to invest given that it can only invest in publicly traded companies listed in emerging markets.
However, our focus on emerging markets equities is exactly what has put us in the pole position for the upcoming hazelnut price rally. We remembered that earlier this year there was an IPO in Turkey – an emerging market we love dearly – in which a local hazelnut processing company went public without much fanfare locally and with very little foreign investor interest. Nonetheless, there still was something truly astounding about this IPO – it made the company the only publicly listed hazelnut business in the world.
We got enormously hyped up to learn all we can about this recently IPOed hazelnut company and find out whether it might benefit from the post-frost hazelnut market dynamics. We were also eager to understand the hazelnut supply situation in Turkey in depth – better than any other investor in the world.
We managed to swiftly schedule a trip to Turkey to meet with the company’s top management and visit its hazelnut processing facilities, and got on a late-night flight to Istanbul. At the very least, we thought, we would eat and hoard some Turkish hazelnuts before supplies run out or they become unaffordable. We arrived in Istanbul very late – or very early, depending how one looks at it – and crashed at the hotel to get a bit of sleep before a day of true emerging markets research.

At 5am outside our hotel in Istanbul before departure for due diligence of the only publicly listed hazelnut business in the world




Consuming Nutella at dawn
“The sun was shining, the colors were vivid, and the streets of Istanbul were bustling with activity…” – we wish this beautiful passage were true about how we started our due diligence trip the next day. However, it was not: when we departed from our hotel at 5am to visit the company’s hazelnut processing plant in Sakariya two hours from Istanbul, it was still dark outside, our eyes could barely see after just a few hours of rest, and the city was well-asleep.
We are used to such early due diligence rises in Turkey though, having in the past started our visits well before dawn on several occasions in order to meet with one particular leather goods company’s disciplined early-bird triathlete CEO at his office in Istanbul and at his factory in Düzce, as well as in the water somewhere between Europe and Asia while crossing the Dardanelles strait aswim. It pays off to be early: the leather goods firm is among the top-10 performers in our fund in the past decade (maybe the hazelnut company will come close, judging by how early we departed for our research?).
We had planned well for our road trip to Sakariya. Given that the breakfast at the hotel was not yet available when we left, we made sure to arrange our own: we had a very good morning with Nutella (made from Turkish hazelnuts) richly spread on traditional Turkish simit bagel buns – as well as Dubai chocolate (as a symbol of what brought us to Turkey this time) – in the car on our way to the hazelnut processing plant. Consuming that much sugar chocolate just as the sun was rising and illuminating the picturesque Turkish countryside – with the classical Nutcracker ballet music playing in the background and signaling that the festive season may soon be upon us due to a potential “Christmas came early” type of investment opportunity – was a total bliss. A sugar crush that followed ensured an unavoidable nap, from which we awoke happy and energetic – we were ready for some nutty due diligence upon our arrival at the plant.

On our way to a hazelnut processing plant in Sakariya two hours from Istanbul, enjoying simit bagels with Nutella and Dubai chocolate













The largest in the world: we are awed
We have met over 2,000 companies in over 30 countries working together in the last six years, and an unassuming observer could still take the liberty to assume that nothing can impress us in company meetings or factory visits anymore after all the countless trips and experiences. But how wrong would that assumption be! Our all-encompassing tour of the company's expansive hazelnut processing facilities certainly left us speechless (due to the plant’s scale) and at times breathless (we had to climb some stairs), and ultimately made our research trip timeless – one for the history books (or at least investment blogs). We reckoned this due diligence visit was in fact one of our all-time top-3 most outstanding factory tours ever.
The size of the plant was extraordinary: it is the largest hazelnut processing complex in the world that can process 300,000 tons of hazelnuts per year at maximum capacity. During the peak season in August and September, the plant receives 2,000 tons of hazelnuts per day: there is a line of 100 massive trucks loaded with freshly harvested hazelnuts waiting to enter the factory round-the-clock. A respectable 10% of the entire global hazelnut supply is processed at this facility in some years!
When the hazelnuts are delivered to the plant, they first undergo a procedure named “yield measurement” which reveals the quality of hazelnuts by measuring the weight of kernels relative to the weight of shelled hazelnuts – typically, the figure is around 45-50%. Then the hazelnuts are loaded into a storage facility of such caliber that one has to see it to believe it: reaching 17 meters in depth and capable of storing 15,000 tons of hazelnuts all at once, it is the largest hazelnut storage in the world.

Visiting the largest hazelnut storage facility in the world with the company’s CEO
From the storage depot, the nuts are moved to a cracking plant which can process over 500 tons of hazelnuts per day. This is where the hazelnut shells are broken and the kernels are sorted according to size – the most common size formats in the industry are 11-13mm and 13-15mm. Earlier this year, the company made important investments in production efficiency by purchasing new laser machines which sort the kernels at very high speeds by using artificial intelligence – these laser robots can do the job of over 1,000 human workers, significantly improving capacity processing times in peak season; the management expects this investment in AI-run sorters to pay off in less than a year.
A highly enthusiastic head of production – who is now in his 22nd year working for the company – was very articulative when showing us this new machinery as well as the patented hazelnut processing equipment which he personally invented. All of the machines at the factory are connected to an enterprise resource planning system, helping optimize production levels.

Touring the hazelnut cracking plant with the company’s head of production
After cracking, the kernels are either prepared for client delivery or go further into roasting. Not quite like a lazy Sunday roast – rather the opposite – the company’s roasting plant works at a very high intensity, exuding a pleasant roasted hazelnut smell and preparing the tasty golden-brown kernels for long-distance trips to the supermarkets or chocolate factories of the world.

Studying hazelnut roasting processes at the company’s roasting facility
The company’s methodical head of quality – who has been with the business for 21 years – then showed us a sophisticated laboratory which has been operating for 30 years and is the best in business. The lab analyzes the kernels and roasted hazelnuts to ensure that the products are free of toxic substances and pass strict standards set by the food industry regulators as well as leading global chocolate or hazelnut butter manufacturers which the company counts as its customers. She also gave us tips about hazelnut products we can find on the grocery store shelves; now we know which chocolate brands have the highest-quality hazelnuts and the lowest sugar content.

Visiting the laboratory with the company’s head of quality
We naturally finished our step-by-step tour of the hazelnut processing plant with a visit to the warehouse where finished hazelnuts products are waiting to be bought by their future consumers. We glanced at several thousand bags full of hazelnut kernels – one ton each – sitting in the inventory. In the company’s Q1 financial report, its inventory was reported at $164m, and since then hazelnut prices increased by over 30% due to an April frost – as such, we estimate that the inventory we saw can be worth over $200m, representing 40% of the company’s market capitalization. We thought in a hugely squeezed supply environment with hazelnut prices poised to continue growing it surely doesn’t hurt to have so much inventory.

On our stroll through a vast hazelnut vault









Activating a new carbon factory to double earnings
As we toured the largest hazelnut processing plant in the world, we wondered: where do all the broken hazelnut shells go once the kernels are extracted from them? It turned out they would typically be sold to the market for about $0.10 per kilogram – with end consumers often being kebab shops that would use the shells as fire material to grill delicious Turkish şaşlık.
However, recently the company invested in a new large-scale project that will completely change the way those hazelnut shells are utilized: in late 2023, it bought land adjacent to its main hazelnut processing campus, and it is currently building an activated carbon production factory on that land. The new factory will be converting hazelnut shells into activated carbon to be used in pharmaceutical, food and beverage, and industrial applications. We eagerly proceeded to have a tour of this facility, led by the company’s energetic head of activated carbon production who is an expert in procurement and chemical production with a career of over 20 years spanning roles at top Turkish production enterprises. What is especially interesting in light of the gentleman's current role is that his father was the company's first production manager several decades ago.

On our way to the new activated carbon factory with its management
After a quick one-minute ride through the company’s campus, we visited a nearly finished gigantic factory building that will become operational already in September this year. The factory’s expansive production floor will house six major carbon-making equipment lines made in Australia, with a high 16-meter ceiling allowing to add six more production lines on a potential second floor – doubling production capacity in the future as customer demand increases. The plant will be highly efficient: it will be automated to the extent that it will only need three people to run it, and the energy to operate the plant will be generated by using synthesis gas created during conversion of hazelnut shells to carbon – the factory will even be able to sell excess electricity back to the grid.
In order to produce one kilogram of activated carbon, six kilograms of hazelnut shells are needed, which compares favorably to using wood which is not as carbon-rich as hazelnuts. It surely helps that close to half of the factory’s supply of hazelnut shells will come from the cracking plant next door that will provide it with over 50,000 tons of shells per year essentially for free. The value-add will be enormous: the price of one kilogram of the most basic activated carbon starts at $2.50 – which is 25 times greater than selling the shells directly to the market and kebab grillers like before! And with higher-margin products, the earnings will be even more lucrative.

Observing a miniature version of the furnace that will be used in the activated carbon production process
Once completed, this plant will become the largest activated carbon plant in Turkey, as well as the world’s largest activated carbon plant that uses hazelnut shells. The management is very optimistic about the project’s potential and is already receiving inquiries from potential large-scale domestic customers. It makes good sense to buy from a Turkish neighbor: for example, at the moment large local carbonated beverage businesses have to buy activated carbon for their water filtering needs from China, with payment required four months in advance and with long delivery times – not too convenient, truth be told.
We estimate that when this vast plant is fully operational by 2027 at a planned production capacity of 22,000 tons of activated carbon (implying over 130,000 tons of processed hazelnut shells per year), its total earnings will match the level of earnings of the firm’s entire existing hazelnut processing business – thanks to significantly higher margins – helping double the company’s earnings numbers.

At the construction site outside the new activated carbon factory with the head of activated carbon


Using big data for weather forecasts
After due diligencing the construction and fitout of the activated carbon plant, we visited a hazelnut orchard on the company’s campus with the CEO. The pleasurably green hazelnut trees were full of developing hazelnuts and getting ready for harvest in two months, provided they will be spared by any upcoming summer heat waves – they already got lucky earlier in the year when their particular location was largely spared by a frost.
The CEO explained to us that it is no coincidence that the Turkish Black Sea region with its mild climate is an ideal natural habitat for hazelnut trees which require very specific weather conditions to produce a rich harvest in August: they need relatively cold weather from November to March, then warm sunny weather until mid-June, and then sufficient rain until late July. If this weather pattern breaks abruptly – which typically happens once every decade – the crop would get severely impacted.
We learned that the company – whose output depends so much on climate conditions – is very serious about the weather data: it has weather stations across the Black Sea provinces which send meteorological data to the headquarters for analysis and modeling, and has people on the ground checking data accuracy. Its weather scientists track weather patterns received from satellites and have developed a big-data weather prediction model which helps the company buy hazelnut inventory in advance of high-probability disruptive weather events.

Visiting the company's hazelnut orchard with the CEO



Tracking stink bugs in real time
Rough weather is not the only major issue that can affect a hazelnut crop. Another problem – small in size but large in nuisance – is the brown marmorated stink bug. This invasive stinky little creature originally from East Asia first settled in Turkey only in 2017, but has become so widespread since then that it has invaded every piece of Turkish land where hazelnuts are cultivated. According to a piece of highly insightful academic research which we absolutely enjoyed studying, in a given year the stink bug – this tough nut of nature – can damage from 12% to 17% of Turkey’s entire hazelnut production.
True to its data-driven approach, the company sets up hundreds of smart sensor bug traps across the Turkish Black Sea region that are connected to an online server and provide real-time infestation data that helps identify alarming bug riots on hazelnut farms. In cases of severe infestations the company would simply avoid buying bug-damaged hazelnuts from infested farms red-flagged in the trap data analysis, and in milder instances the affected orchards are given special “treatment” by the company's partner farmers to get rid of the pest. One method to address the stink bug problem that the hazelnut growers have been using more recently is introducing a predator that attacks the bug – for example, a certain wasp species. The whole process is actually quite similar to politics, starting with infestation identification and ending with parasite suppression – big brother is always watching.
We were glad to see that the hazelnut orchard on the company’s campus was not affected by the bugs – the leaves and the nuts were free of them. However, the bug trap nearby was catching a good number of these unwelcome visitors – signaling that the infestation risk is always one leaf (or hazelnut) away.
We thought to ourselves: for most businesses, the external, macro risks come from fairly banal agenda such as interest rates or tariffs. In a case like this hazelnut business, the external risks come from the weather and stinky bugs, more than anything! And it appears that the best way to deal with these risks is by using as much data as possible and acting on it timely.

Observing a stink bug trap at work with the company’s CEO





500 kilometers of water pipes in Chile
After visiting the plants, measuring the weather, and catching the stink bugs, we sat down with the CEO and COO at their Sakariya factory office for a Turkish tea ‘n’ Nutella chat about the company's strategy. What we learned was no less impressive than all the different parts of the business we saw during our tour earlier. It turned out the company has very big growth ambitions in… Chile.
At first, Chile seems to be very far removed from Turkey, without much cultural connection between these two beautiful countries. In reality however, according to the company’s experienced management, Chile is the best place in the world for food production, with holistically favorable conditions for growing hazelnuts thanks to its mild weather and institutionalized farming expertise. The Chilean agricultural market is very efficient: while in Turkey there are over 500,000 standalone small-scale “artisan” hazelnut farmers, in Chile there are only 600 which are typically larger agricultural enterprises employing modern farming techniques – this results in a 4x higher hazelnut production yield than in Turkey. The only small barrier to growing hazelnuts in Chile is the need to provide water to the orchards as the rain is much rarer than in the Turkish Black Sea region, but this is easily resolved through data-based irrigation technology.
Since 2017, the company has bought over 150 hectares of land located 200 kilometers from the country’s capital Santiago, and has already planted over 70,000 hazelnut trees, supplying water to the orchards through an irrigation system measuring over 500 kilometers in length. Growing hazelnuts in Chile helps the company not only increase its total production output but also fulfill customer needs all year round, given the Southern hemisphere’s reverse seasonality: the harvest in Turkey is in late summer while the harvest in Chile is in late winter.
According to the management, over the past 20 years, Chile has shown the largest increase in hazelnut production compared to other major hazelnut-growing markets – Turkey, Italy, USA (Oregon), Azerbaijan – and in the next seven years is estimated to become the world’s second-largest producer after Turkey, with an annual production capacity of 200,000 tons of hazelnuts. However, Chile still doesn’t have its own hazelnut processing plant, and the hazelnuts often have to be shipped to Italy for processing – quite a far way out.
To take advantage of this mismatch between the increasing market size and the lack of processing capabilities, the company plans to build a hazelnut processing plant in Chile in 2026, essentially becoming the only hazelnut processing business in the world’s fastest-growing hazelnut market. The plant will have a capacity of processing 25,000 tons of hazelnuts – a quarter of the country’s current annual hazelnut output – and if Chilean output doubles in the next seven years, as expected, then the plant will have even more cracking to do.
After the new hazelnut processing plant in Chile and the new activated carbon factory in Turkey are completed, we think a natural step for the company would be to build an activated carbon factory in Chile that would use hazelnut shells. Given the Chilean hazelnut market growth, there will be more and more hazelnut shells available for peanuts (pun intended), all while there just aren’t as many kebab shops in Chile as in Turkey to use all those shells for grilling tasty meat. And astute hazelnut businessmen like the company’s management seem to never let good hazelnut shells go to waste when they can redirect them to high value-add activated carbon production instead.
A fun fact we found especially impressive about the company’s dealings in Chile was that the CEO – in his capacity as the chairman of the Turkey-Chile business council – managed to convince Turkish Airlines to start flying from Istanbul directly to Santiago (with a quick pit-stop in Sao Paulo without leaving the airplane). All for bridging such far-removed places united by their affinity for growing hazelnuts.

View of the company’s hazelnut processing plant in Turkey – coming soon also to Chile!







A staggering loss of hazelnut supply
By now, even the most patient readers would have likely become impatient: we are hugely impressed with the company and all of its “world's largest” and everything – they would say – but what about the hazelnut price outlook?
Of course, we wouldn’t escape going deeper into the matter of the hazelnut prices – but first we wanted to make a case that the company we researched will do well regardless of hazelnut prices, thanks to efficiency improvements at its existing hazelnut processing plant, several growth catalysts such as new factories and projects in Turkey and Chile, and high-quality committed management team driving the business forward.
Having said that, the April frost and the resulting hazelnut supply shortage do in fact make this company’s investment case (as well as the investment case for the hazelnut prices themselves) profoundly stronger for the next 12 months – and there is actually more to this story than the frost. We presented the research findings from our study of the hazelnut market to the company’s management team to see if our logic is correct – who else could better validate or criticize our thesis than the top people at the world’s largest independent hazelnut processing business? Our train of thought we shared with the CEO and COO was as follows:
1) March 2025: The Black Sea Exporters’ Association (BSEA) announced its crop estimate for the 2025/2026 hazelnut season in Turkey. Based on hazelnut flower counts, this season’s crop was expected to reach 768,000 tons.
2) April 2025: A devastating frost hit the Turkish Black Sea region. Early assessments mentioned in the local Turkish media estimated that at least 30% of this season’s hazelnut supply was lost due to the frost, indicating a potential crop reduction to a total of 538,000 tons or lower.
3) June 2025: The Turkish Statistical Institute (TÜİK) published its crop estimate for the 2025/2026 season, which took into account the frost impact and confirmed the extent of the damage. This season’s crop is now expected to reach only 520,000 tons – implying a 32% hazelnut supply loss compared to the pre-frost estimate from March by the BSEA.
4a) Summer 2025: According to academic research we cited earlier, every year there is considerable damage to the hazelnut crop from the brown marmorated stink bug, to the tune of 12% to 17% of the year’s crop. Even if we more conservatively assume “only” a 10% damage to the remaining post-frost crop from the stink bug, this season’s crop estimate then decreases further to 468,000 tons.
4b) Summer 2025: In addition to the impact from the frost and the stink bug, the crop can be further impacted by heat waves which have become more frequent in recent years. For instance, there is a heat wave expected in late June that will strongly affect the Western Black Sea region, home to a large number of hazelnut orchards. The irony is that the heat does not kill the stink bug – on the contrary, it makes it even more active. We estimate the extra damage from the summer heat and the “activated” stink bug at another 10,000-15,000 tons lost.
5) August 2025: The harvest starts on August 10th. Based on our analysis, we would not be surprised if this season’s final hazelnut production in Turkey stands at just over 450,000 tons, implying a total loss of over 40% of the country’s originally expected crop. For the global hazelnut market, in which Turkey accounts for close to 70% of total production, this could mean a massive supply loss in the magnitude of 25-28%.
The CEO and COO – who appreciate all things logic and data – listened to our analysis with interest. They responded that we have presented a realistic supply scenario backed by valid, fact-based information from the trustworthy public sources, and that our analysis is not far off their own market estimates informed by their bottom-up insights gathered on the ground through farmer relationships as well as the data from weather stations and smart stink bug traps. They added that no other investor they know has taken that much interest, time and effort to truly understand how the hazelnut market works – as well as to study in such depth how the largest company in this market operates.
Both the CEO and the COO have been in the industry for 21 years and remember very well the previous supply squeeze after a comparably dramatic 2014 frost when the hazelnut prices increased 3x in a year following the frost. We asked if anything is different in the market or in the industry this time, and learned that while annual hazelnut supply capacity in Turkey is the same, the demand for Turkish hazelnuts has grown +32% since 2014: from 95,000 to 145,000 tons of hazelnuts for domestic consumption, and from 500,000 to 640,000 tons for exports – for a total increase in demand from 595,000 tons in 2014 to 785,000 tons in 2025. This implies that the supply of the Turkish hazelnuts is going to be shorter than demand by over 300,000 tons this season – a staggering figure.
When we asked the management team if it’s possible to somehow find the missing supply anywhere, we received a laconic response: “Only if someone finds hazelnuts on Mars and brings them to Earth”. Fair enough. The CEO concluded: “This year, we might experience the mother of all seasons”.
We believe it is very likely that we will witness a post-frost 12-month hazelnut price increase between 3x and 5x, with the next hazelnut price spike to occur in August as global buyers realize that the Turkish harvest didn’t quite happen the way they automatically assumed in their corporate spreadsheets it would. This will be especially painful for hazelnut chocolate lovers, given that the cocoa prices had already quadrupled in the past two years.

In the company’s factory office to present our study of the hazelnut market to the CEO and COO. The COO enthusiastically follows local football clubs and ordered all their uniforms with his name to express his support.







Moneybalsu
Discussing the niche hazelnut market in detail with a team of two data-driven executives at a factory two hours outside Istanbul felt a bit surreal. This feeling was further exacerbated by the ambience of the team’s simple factory office with over a dozen framed football shirts with the COO’s name imprinted hanging on the walls – those were the uniforms of the amateur local football clubs he supports. We realized what this setting reminded us of! – Moneyball (a Brad Pitt film based on the Michael Lewis book). Two humble guys running a successful, world’s best business by using sophisticated weather pattern models, collecting stink bug data from the traps set up in various Black Sea provinces, inventing new hazelnut processing equipment, and creating activated carbon out of waste – that too could make a great movie or a book (or at least a blog by emerging markets investors traveling the globe in search of hidden gems).


We couldn’t help but make a cheerful comparison between the company’s management team and the Moneyball movie characters
Earlier this year, this Turkish Moneyball team’s climate data models highlighted a weather event that indicated very high risk for the hazelnut crop: the month of March was exceptionally warm. Very warm early spring weather led to hazelnut trees growing much faster than usual, significantly decreasing their tolerance to cold because the more developed the trees are the more helpless they become when exposed to low temperatures. Eventually, the evil frost hit in April and sadly a lot of damage was done to the young and hopeful Turkish hazelnut trees. However, the company seems to have managed to buy substantial hazelnut inventory in the warm March before the frost – guided by its probabilistic weather prediction models – given that the reported inventory on its balance sheet increased by 17% from the end of Q4 to the end of Q1.
Our view is that not only the large inventory can help the company enjoy a “mother of all earnings seasons” this year. If the hazelnut prices increase as we expect them to, the company also stands to enjoy windfall revenues and earnings thanks to much higher sales and greater margins as the demand for hazelnut products will far outstrip supply and the buyers will be happy to pay premium prices (actually unhappy but without much choice anyway).
There was a precedent last year shaped by extremely similar circumstances. When the global cocoa production dropped 14% due to adverse weather events and crop diseases in West Africa (a region that produces 70% of the global cocoa supply), the cocoa prices increased 4x. As a result, the world's only publicly listed pure-play cocoa processing business from Malaysia (which sounds like a twin of this Turkish hazelnut firm) doubled its margins and grew earnings by 325%. Its stock tripled – and what is interesting, it went into a steep price spike after the cocoa prices had already doubled in the prior six months!
Niche, standalone agricultural processors don't have publicly listed peers, and thus it takes time for the market to understand them – the most common initial misconception is that they would suffer during supply shocks. But the reality is the opposite: because they are processors – and not the growers who suffer the actual production loss – they benefit tremendously as higher prices allow them to substantially expand margins. When investors finally get this – typically after a quarter or two of stellar earnings – the stock can move lightning-fast.
We estimate this hazelnut company’s earnings growth in the next four quarters to bring its price-to-earnings ratio into single digits, before further positive effects on the income statement from the activated carbon project in Turkey and the hazelnut processing plant in Chile kick in during 2026. For a business with some of the world’s most impressive hazelnut processing facilities as well as longstanding partnerships with top global chocolate producers and local Turkish hazelnut farmers built over dozens of years, this valuation appears attractive.
When we first looked for the company’s financials, we were amazed that there were none available on Bloomberg. The number of sell-side analysts covering the company equals 0. The recent IPO went without much foreign interest at all, and with a muted local demand. Investors struggle to understand if this is a commodity business or an industrial one. The company doesn’t have an investor relations website page in English yet. And being the only listed hazelnut business in the world doesn’t help “lazy” investors always looking for “comps” (i.e. comparable firms) either.
All of these small gaps in investor understanding only increase our interest in the stock: it is a typical "hidden gem" which due to a limited investor exposure doesn't get enough credit in the market for its solid fundamentals. With quick fixes in the company's investor relations and communications, a great deal of shareholder value can be unlocked. We provided several friendly recommendations to the management, which included trying to get sell-side analyst coverage and introducing quarterly analyst calls and earnings press releases in both Turkish and English. We believe they can help the stock start getting the attention it deserves for its strong long-term prospects at a time when it will naturally be gaining wider short-term following by the famously proactive Turkish retail investors as the company begins reporting hazelnut hysteria-boosted earnings (which will lag the hazelnut spot prices and should be relatively easy to predict in the next 12 months).
This hidden gem of a company brought back some great memories, reminding us of a time during the Covid pandemic when we were early investors in a Malaysian medical glove manufacturer. Similarly to this case, there was also a severe supply-and-demand shock; there was no major media reporting about the skyrocketing demand for medical gloves, and the stock price was flat for several weeks after the beginning of the pandemic; there was very limited sell-side analyst coverage; and the company was listed in an emerging market, making it difficult to invest in for global funds. Back then, the stock ended up returning +1,400% in just a few months, literally exploding thanks to a little spark from a Bloomberg article. It helps to be early – before the media and the analysts wake up – even if it takes (ad)venturing on Turkish countryside due diligence trips before dawn like we did this time.

The company’s COO giving us a lecture on hazelnut farming in the Turkish Black Sea region – the world’s hazelnut orchard






Co-existing with robots out of social responsibility
Having completed our exceptionally comprehensive due diligence tours of the company’s hazelnut processing and soon-to-be activated carbon production businesses, as well as learning about the Chilean business and validating our hazelnut market outlook by the management, we returned back to Istanbul to have lunch with the CEO and COO before our departure back to Dubai. We always like to “research” the management teams running the companies we consider investing in, and asking meaningful questions helps us better understand their personalities, leadership styles, and values. When this inquisitive process comes with a view of the wondrous Bosphorus splitting Europe and Asia – what could be better?
Grilling the management with our questions while consuming delicious local grilled fish, we learned important details about the company’s history. The business was founded in 1979 in Munich, Germany, as a hazelnut import company, and in 1985, the firm started its first operations and built a hazelnut processing factory in Turkey. There is a unique family business dynamic (which works exceptionally well) whereby both the founder of the company and its first professional CEO – who were not related – are now represented in the business by their second generation: the founder’s son-in-law is the current COO, and the first professional CEO’s son is the current CEO. It is possible that the third generation will also join the company at some point, ensuring long-term business continuity.
The CEO worked his way up through the company ranks over two decades and was granted a sizable minority stake in the company by the founder as a reward for his competence, loyalty, and strategic impact. Given his father's and his own long tenure in the business, it is clear that the CEO is not simply managing the company as a career executive – he is carrying his father's legacy forward, which entails a much stronger emotional attachment to the business and ensures a fundamentally steadfast intrinsic motivation to perform.
In the last 40 years, the company has worked hard to build strong relationships with the Turkish community of farmers: it now has direct relationships with over 50,000 farmers and buys hazelnuts from over 110,000 farmers – a competitive advantage that would be impossible for any new entrant to replicate. The management emphasized that it is highly important to respect and trust the farmers, employees, and customers, and work through any tough stretches – such as this year’s frost – together. The CEO and COO explained that their business cannot be run on a purely transactional basis from the headquarters in Istanbul: in order to develop deep, personal relationships with the farmers, they regularly travel to the Black Sea provinces, spend time on the ground, and shake hands with people.
We recalled a telling story that the company’s head of production shared with us at the plant: even though the new laser sorting machines eliminated the need for human workers, the sorting line staff have not been fired and will leave the company only when they reach official retirement age. This decision was made out of social responsibility for the workers – who have been with the company for years or even decades – and the families they support. For now, they will be sorting hazelnuts alongside robots, helping increase the company's total production capacity.
It was evident to us that the company’s culture was done right. The CEO, COO, head of production, head of quality all have been with the firm for over 20 years – and all are still genuinely motivated and enthusiastic about the work they do day after day, year after year. According to the groundbreaking research by professor Alex Edmans, happy employees not only produce better business performance but also deliver long-term stock price outperformance for their companies – and we are sure that happy owner-operators deliver even higher returns.

Having lunch with a mesmerizing view of Bosphorus on the Asian side of Istanbul with the CEO and COO of a $500m hazelnut business



We are happy!
It was an immeasurable pleasure to visit Turkey again, to spend time with hard-working and down-to-earth Turkish people, and to visit Istanbul – in our view the world’s most beautiful city with unique history, mesmerizing nature, and dynamic community. We thanked the CEO and COO for their time and took off for the airport. We felt certain that this research trip was one of our best ones yet.
We also felt happy to have the best job in the world – emerging markets investors – allowing us to be intellectually curious and autonomous, to travel to the most interesting places on the planet, and to meet great people from different cultures united by the same core human values. And happy investors deliver long-term fund outperformance for their clients!

Tired but happy, we arrived at the airport for our flight back to the birthplace of Dubai chocolate





Last call: buy Nutella before it's too late
Our professional exposure to emerging markets such as the UAE (with its Dubai chocolate) and Turkey (with its tasty hazelnuts) – as well as our endless curiosity – has uniquely positioned us to become aware early of a sheer global supply crisis not many would ever spot. We recognized a severe dislocation in the niche hazelnut market. Nothing could stop us from learning as much as possible about it, and we made an urgent unplanned trip to Turkey to meet with the top management of the largest – and the only publicly listed – hazelnut business in the world to assess its bottom-up strengths as well as analyze the degree of the supply crisis in the market.
We found a true hidden gem. The company still has no analyst coverage and trades at a cheap forward valuation, yet it offers several growth catalysts in the short, medium, and long term: the largest activated carbon plant in Turkey, the only hazelnut processing plant in Chile, a potential activated carbon factory in Chile – and of course, the tremendous hazelnut supply and demand mismatch in the market which can help it generate windfall earnings over the next several quarters.
Based on our deep study of the hazelnut market and its largest player, we are ready to make a bold prediction: in a few months from now the world will witness a true hazelnut frenzy. As a result of a severe frost in April followed by stink bug activity and a heat wave over the summer, we expect the hazelnut prices to increase 3x to 5x in the next ten months compared to their pre-frost readings, serving anyone with substantial hazelnut inventory very well.
A massive hazelnut price spike seems imminent – the global supply is severely reduced by at least a quarter. There simply is no place to get these missing hazelnuts from at scale until the next year's harvest in Turkey in August 2026 – they can't grow out of nowhere, and there are no major strategic stockpiles anywhere that could soften the supply blow. The mother of all hazelnut seasons is truly coming after us, and she may act harsher than during her 2014 temper outburst that saw a similar supply drop and a 3x hazelnut price increase that followed – this time, the global demand is much higher. There is no safe space in the global hazelnut orchard to hide from the biting hazelnut rods leaving the buyers with scars of scarcity.
For our part, we had to buy new luggage bags at the glorious international Istanbul airport to load up on hazelnuts at the airport’s nuts-and-spices bazaar before our departure. We finished this trip with one clear thought on our minds: this year, instead of cracking jokes, we would rather be cracking hazelnuts.
And if we were to give a friendly tip to our followers who read this piece to the very end: make sure you get the fantastic Turkish hazelnuts (or Nutella, or Ferrero Rocher) now – they will get much more expensive soon. You heard it here first (unless you are a hazelnut farmer from Turkey – then we sincerely feel sorry for you).
P.S. To our liking, Turkish hazelnuts are much healthier and taste better than Dubai chocolate.
*As we anticipated, our blog did in fact trigger Bloomberg and other major media to report on the hazelnut supply situation earlier than in August. Ten days after our piece was published, Bloomberg came out with an article Nutella Fans Brace to Pay More as Frost Hits Turkish Hazelnut Harvest, which was then reprinted by a large number of global media from the UK and Brazil to Singapore and Malaysia.
