In this podcast, Motley Fool host Ricky Mulvey caught up with Nicola Twilley, the author of Frostbite: How Refrigeration Changed Our Food, Our Planet, and Ourselves and the co-host of the Gastropod podcast, for a conversation about:
- The cold chain and our economy.
- Finding investment opportunities inside of refrigerators.
- One reason why Unilever gave up on ice cream.
- A new technology changing how we eat fruits and vegetables.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on June 30, 2024.
Nicola Twilley: He's trying to figure out what these very poor people are going to do as they ascend to middle-class stages. What are they going to buy so that he can invest in those companies and make money? The problem is, we know that as people get richer, they change what they eat. But when you ask them what they're going to eat, they're like, Oh, no, no, no, I would still eat the same things. I wouldn't change anything.
Ricky Mulvey: I'm Ricky Mulvey, and that's Nicola Twilley, the author of Frostbite, how refrigeration changed our food, our planet, and ourselves. She's also the co-host of Gastropod. We played a part of my conversation with Twilley on Friday's show. It's about how the technology of refrigeration followed the Gartner Hype Cycle because its history has some lessons for investors today. If you haven't listened to that first part, I recommend you listen when you can, but if you haven't, today's show will make sense in and of itself. I chat with Twilley about her experience inside the cold chain, what it's like working in refrigerated warehouses. We also talk about why ice cream is especially tricky to handle and how an emerging markets investor made money by checking the fridge. You have been following the artificial cryosphere for a while now and it's something that we come in contact with in a very small form, maybe our refrigerators at home or the frozen food section at a Walmart. But you've called it the third pole. Can you give us a scope of the artificial cryosphere?
Nicola Twilley: Yeah, I ended up calling it the artificial cryosphere to distinguish it from Earth's natural cryosphere, so that's the ice caps at the Antarctic and the Arctic and the glaciers that are increasingly shrinking. The irony, of course, is that as the natural cryosphere is shrinking, the artificial cryosphere, the places we've built for our food to live in, that's growing. It's already at over 5 billion cubic feet. That's huge, but it grew 20% between 2018-2020. There's a global cold rush underway so, it's expanding at a extremely rapid rate as our natural cryosphere shrinks. I'm not just talking like you say about your home fridge or the walk-in at the restaurant or the freezer aisle at the supermarket. I'm talking about these gigantic refrigerated warehouses and juice tanks and avocado ripening rooms and meat lockers that most of us, even the most committed foodies and chefs will never have seen.
Ricky Mulvey: You saw the inside of Americold, which is a real estate investment trust that is heavily involved in the cold chain. What was it like in your day working there? What's it like to work inside of the cold chain?
Nicola Twilley: This is going to make me sound stupid, but it's really cold. It's hard to exaggerate how cold it is. Obviously, I figured it would be cold. They kit you out. I was working shifts in Americold locations in Southern California. You show up. It's this gorgeous day outside as it is in Southern California. Then you go in, they kit you up with refrigerator gear, which is this special company that makes equipment for people who work in refrigerated warehouses. It's called Iron Tuff -50, and it's supposed to keep you warm down to that temperature. It's pretty great stuff, but let me tell you, once your toes and your nose and your fingers get cold, it's all over. You're really cold. I was told that, you know, a lot of folks they do their first shift. They leave at lunchtime. They're just not OK with being that cold. Americold is the second-largest refrigerated warehouse provider in the world. They're global company. I wanted to get a sense of what it is like to work and be in these spaces that we have built for our food to live in, but we so rarely see inside. So the way to do that is to work alongside folks and get a sense for the rhythm, what goes in, what comes out, what it's actually like to work there.
Ricky Mulvey: What did you learn about the workers who stayed there longer than lunchtime? It seems like it takes a special type of person to work for years in a refrigerated warehouse.
Nicola Twilley: My co-workers were really the best part of working in the cold. You do have to be a pretty tough individual. A lot of them end up saying, Oh, they love the cold. It keeps them young. I guessed one of them as being a full 10 years younger than he actually was, and he was like, see, it's the cold. It preserves me, just like it preserves your milk. So, it's interesting. It's a terrible place to work if you wear glasses because your glasses are constantly steaming up from the condensation as you change, you come out of the cold room, into the cold room, into the freezer, out of the freezer. If you have a mustache, you will grow icicles off that, so also a bad idea. Everyone gets sick. They all warned me about that, cold, sneezes, something called freezer flu and there is actually a scientific reason for that. You actually are more likely to catch a cold in the cold. It's a mechanism that scientists have only just discovered. There are these little bubbles in our noses that prevent the cold virus from sort of settling and taking hold, and you make fewer of those bubbles in the cold. So if you work in the cold, you're more likely to get sick. That was kind of interesting. You have to be slow steady and patient because one of the things that's interesting is the way cold preserves food is it slows down the metabolism of the things that are trying to eat our food. So all the bacteria and the fungi that are trying to eat our food before we can, they have their metabolism slowed down in the cold. Same with produce. It is breathing. It's a living thing, and it breathes more slowly in the cold, so it has more breaths before it dies. Hence, it's preserved for longer. But the cold also slows humans down. So actually, however fast and sharp you think you are, I went into the cold storage warehouse with my type 'A' personality thinking I was going to ace this. They call it cold stupid. You just operate more slowly in the cold. Everything does. Actually, you have to have special computers, special equipment. There are heaters on screens. The engine oil gets clogged up and sticky, so things work less well. Everything just goes a little slower in the cold, which makes a cold warehouse one of the most dangerous working environments in America. Warehouse work is already one of the more dangerous jobs. Add cold to that, and it really is a dangerous and tough environment.
Ricky Mulvey: You mentioned ice cream as well, and one of the stories we saw earlier this year in the business world is that Unilever spun off their ice cream division, which includes Ben and Jerry's. A cold chain is difficult enough to take care of. But is there anything unique about ice cream that makes it especially difficult to get through a cold chain into a freezer in a grocery store?
Nicola Twilley: Absolutely. Yeah, ice cream is well known for being one of the trickiest items you can handle in the cold chain, and there's a few reasons for that. So first of all, for non-premium brands, so for things like Turkey Hill or Breyers, or things like that, a pint of ice cream is about half air. When you buy that ice cream, half of it is air. That leads to a lot of logistical headaches because when you move that ice cream around the country, it goes up and it goes down. There are mountain ranges, the Rockies, the Sierra Nevadas. What happens is at those higher elevations, air is thinner and so you get something called overflow or shrinkage. Because the ice cream is 50% air, it will either collapse in on itself and pull away from the sides of the of the container or actually explode out and overflow and have this mushroom puffy top because the air has expanded. You actually can't truck ice cream from Washington State to Georgia because of the Rockies. That's one thing. The other thing with a premium brand like Ben and Jerry's is because you aren't using the stabilizers and emulsifiers that you might use in a less expensive brand. You are really relying on cold chain integrity to keep that ice cream from crystallizing. Now, we've all had that experience when you keep a pint of ice cream in your freezer for too long and it gets crystallin around the top and the texture is gone, and it's just not as nice anymore. That's because your home freezer doesn't maintain the absolute perfect temperature at all times. It lets that slight melt and refreeze and slight variations in temperature that will cause those crystals to form and if those crystals form, your ice cream is ruined. So for someone like Unilever, trying to keep Ben and Jerry's absolutely smooth, creamy, dense, delicious, no crystals, as they ship it around with none of the chemical aids that you might use, the stabilizers that would help. I can see why they got out of that business because I saw it even myself in working at Americold. You pull a palette, you leave it on the loading dock. Well, the loading dock is at a different temperature than the freezer. Then it goes into the truck. But while the truck is being loaded, well, that might be a two hour process, and the temperature is fluctuating, too. So, ice cream really needs white glove treatment, and that makes it a headache.
Ricky Mulvey: I think my main takeaway from that answer is that ice cream is 50% air, therefore, it is healthier than I think you've given me permission for a treat after this interview.
Nicola Twilley: You don't need permission. Treat yourself, do it?
Ricky Mulvey: There we go.
Nicola Twilley: Ice cream is one of the great gifts of the cold chain.
Ricky Mulvey: [laughs] The Cold chain has also allowed essentially the rise of Walmart's grocery business, which you point out is 15% of all perishables sold in the United States. It makes intuitive sense that Walmart's produce is cheaper than Whole Foods produce. Some of that has to do with, I'm sure, the cost of having a huge supercenter versus smaller grocery stores and maybe more expensive rent areas. But how has the cold chain allowed Walmart's rise in essentially domination in grocery in the United States?
Nicola Twilley: Yeah, this was really interesting to me. It was explained to me by a logistics expert called Marc Wulfraat, and he pointed out that when Walmart decided to go into the perishables business, which was surprisingly recently, they hired a bunch of grocery store people and they figured out how to do it. The key constraint is that if you are stacking your own stores with perishable goods, you need to have them within 250 miles of a distribution center, your own distribution center, to keep costs down. That way, you can have the truck load up in the morning at the distribution center, get out to the store, drop off at the store, come back. Two hundred and fifty miles is the limit for stocking a store efficiently. Now, Walmart very deliberately planned its roll-out of grocery in its stores, so that it happened in these 250-mile radii. It just said, Okay, we're going to start here at this circle of stores and build a distribution center here that can supply this circle. We'll leap out from there so at no time was it trying to stock stores from distribution centers that were further away, or subcontracting out that distribution. So it kept tight control over that, and that is what enabled it to be so efficient. Somewhere like Whole Foods, it doesn't have enough stores within a 250-mile radius to justify the cost of having its own distribution center so it has to outsource that, and when you outsource it, well, you're not getting the efficiencies, first of all. Second of all you're paying someone else's overhead. Second of all, you're also not at the top of the list so if there's a delay getting a truck out, that might hit your store. Walmart, because it did this very tight logistical planning around the limitations of the cold chain, it has managed to have those super low prices on perishable produce. Whole Foods has been in the business much longer of selling groceries, but doesn't have the density of stores within that 250-mile radius.
Ricky Mulvey: To make it worth building their own facilities in cold chain.
Nicola Twilley: Exactly.
Ricky Mulvey: We're now at a place where refrigeration is thankfully for us eaters a mature business, but it continues to grow, and the cryosphere comes at a cost, because the first law of thermodynamics, you can only transfer energy, you can't destroy it. Why does the cryosphere continue to grow, particularly in the United States, even though it's such a mature part of our economy?
Nicola Twilley: There should be enough refrigerated space in the US for everybody. We have the most per person of anyone in the world, pretty much. But the issue is, and this is why there is such a lot of investment in refrigerated cold storage right now and such growth in the market even in the US. The issue is to do with location and type. Location, with the expansion of the Panama Canal, for example, a lot of new refrigerated warehouses are being built along East Coast ports. That's because now that the Panama Canal is being expanded, well, food shippers don't want to be dependent on West Coast ports where you have more union presence and more environmental rules, and they can be hit with those. They want the opportunity to ship out of the East Coast too. There's huge investment in South Carolina, North Carolina, Jacksonville, Florida. Those ports are all building a lot of refrigerated warehouse space. Also post pandemic, there has been a transition in American shopping habits. So this rise in delivery and on demand and things like get here. The companies that are doing this two hour grocery delivery service, they have to have distribution centers that can't be far out of town. So they're coming back into cities or peripheral areas and building new cold storage there to deal with this new demand. The other thing is, the American labor force is increasingly saying, you know what? I don't want to work in the cold. I sympathize having done that. Exactly. I am 100% on board with that sentiment. There's this rise in automated cold storages. Those are very different buildings. You can't just retrofit an existing cold storage to make it automated. The automated ones are several stories high. They're really cool. I went into one, and they strapped me to this automated crane handle, and I went swooping through the racks with this inside the machine. They keep them deliberately low oxygen for fire prevention because they're too tall for sprinkler systems. So it was a little bit delirious anyway, and the whole thing was the best theme park ride ever. That's why 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.
Ricky Mulvey: I want to talk about some of the economics and investors in refrigeration. One person who I think would be particularly interesting to our audience is Tassos Papadopoulos. I think I got that right.
Nicola Twilley: You did.
Ricky Mulvey: He made money by looking in other people's fridges, particularly in India. How did Tassos invest based on looking inside people's fridges?
Nicola Twilley: Tassos runs an investment, an asset management firm based in London, and his whole investment strategy is based around looking in people's fridges. He rejects the normal benchmarks. He's like the S&P 500 is for schmuck. Everyone can look at that. I go and look in fridges. What he does, the revelation came to him, actually, in India. He was trying to figure out, here is a country that is and his specialty, I should say, is emerging markets. This is where he goes. He's trying to figure out what these very poor people are going to do as they ascend to middle class status. What are they going to buy so that he can invest in those companies and make money? The problem is, we know that as people get richer, they change what they eat. But when you ask them what they're going to eat, they're like no, I would still eat the same things. I wouldn't change anything. I would send my kid to school, and I would make sure my sister gets the medical treatment she needs. But they don't say, I'm going to change my whole diet, and they don't know. He realized, if you look in the fridges of people who are one socioeconomic class ahead of them, you can see where an entire society will go. So now he does these huge ethnographic immersions. He's just come back from Indonesia, which is a very exciting market for investors. Huge group of very young people poised on the cusp of becoming middle class. He just spends hours sitting down, having them talk through what's in their fridge. He's developed this whole system for analyzing that.They're interested. For example, he told me in India, you can start seeing, they'll buy some processed dairy products. Dairy is huge in India because of the Hindu prohibition on eating, a lot of meat. Dairy becomes a key protein. He noticed, in the fridges of people one socioeconomic class up, there were yoghurts, there were butters, there were cheeses, there was processed dairy. That gives him an investment tip. He goes into that. It also tells him when to divest.
In China, which is another country that has refrigerated really recently, it's further along than India. But only by a little bit. He used to invest in Yum China there, which is the parent company of KFC and Taco Bell, all of those. He went and looked at Chinese upper middle class fridges and saw that actually those buckets of KFC had been replaced by things like green curry and probiotic yogurt, and they had moved on to this next stage where it was about international foods and also health halo, things that were going to make you better, somehow. More worldly, more cosmopolitan, more healthy, so that international fast food was no longer a status symbol and so he divested. This has proven a very successful investing strategy for him, and it's super fascinating process. I tagged along remotely on his latest expedition and sat there and watched as he has people talk their way through their fridge. He does a really interesting exercise where he has them imagine their fridge in 10 years, which is really just people can't imagine their fridge in 10 years. They're talking about what they want right now. It tells you about their aspirations for right now. He came back from Indonesia with a squeezable yogurt company that he thinks is a hot tip.
Ricky Mulvey: There you go. My fridge in 10 years will be significantly cleaner than it is today.
Nicola Twilley: Don't invest on that basis.
Ricky Mulvey: You learned a lot about fridge economics in the United States, as well. One thing that surprised me, and this is from William Rathge, is that economic stress changes how we eat in a more interesting way, which is that people buy more perishable foods, and they also throw away more food when they're under economic stress. What do you think explains that phenomenon? It seems a bit counter intuitive.
Nicola Twilley: It's totally counter intuitive. Bill Rathge was a garbologist. He invented this discipline of sorting through people's trash and figuring out what it said about them. He was like, well we do it for ancient civilizations. We learn a ton from the midden heaps at archaeological sites. Why not go and sort through the trash of middle class homeowners in Phoenix, Arizona and managed to persuade a few graduate students to get the appropriate shots and come along with him and do it. He's the one who really quantified how much food Americans throw away, which is a huge amount. But also, as you say, this really counter intuitive finding that under economic stress, people will buy more and throw away more. I think it comes from a hoarding mentality. Our fridges, there's something very primitive about our relationship with them. It is a cave in which we store, and that helps us feel safe, and as if we are going to be OK and not hungry and not desperate. There is a hoarding mentality. There's an amazing UCLA study that took place over a decade here in LA, looking at people's homes and focusing on their fridges. The level of just stockpiling that took place. Almost the more stress and the more chaos in the household, economic stress, but also just time pressure stress and lifestyle stress. The more they tried to cram into their fridges and freezers to make sure they weren't without. You can see that come through really clearly in the transcripts. It's astonishing.
People's fridges are so crammed full that they haven't been able to get ice out of their ice tray in a decade. But it's a safety mechanism. Honestly, that's how fridges are marketed a lot of the time. As you have a mini supermarket at home. You're going to be OK. You have what you need, whatever it is, even if you haven't thought of it or yet, you're going to be fine. That reassurances is part of their promise, which is why they end up leading to so much food waste because a fridge does keep things fresh, but not forever. It's not this vault that you can put things in and save for retirement. You have to eat it. Eventually, it will go bad, yet, people treat them as a vault where they can put things in, and those things will remain safe.
Ricky Mulvey: After reading Frostbite, it did encourage me to clean out some of the yogurt I had in the back of my fridge. You are having impact on readers, Nikki. I want to wrap up with just a few questions outside of the book. One really has nothing to do with what we've been talking about, but you study food. You know the produce supply chain. One thing I'm constantly amazed by when I go to a grocery store, whether it's Walmart or Whole Foods or Kroger, is that bananas are just so cheap. They're like $0.59 a pound. It makes no sense to me. Why are bananas so cheap?
Nicola Twilley: Partly why bananas are so cheap as a lost leader. Bananas represent 10% of everything that goes across the supermarket scanner, is what I've been told by industry experts. They are a key part of a supermarkets business. They are something that a lot of people buy. They are America's most popular fruit by a really large margin, and so keeping those prices down is going to attract customers. Also, the banana of commerce is the ultimate refrigerated fruit. It's something I talk about in the story. It was really the first fruit to get the full commercial refrigerated treatment, and you get the United Fruit companies great White fleet now Chiquita, bringing bananas under refrigeration, this tropical fruit that, now Americans could enjoy for the first time. I will say it's possible it could become more expensive as those companies are now having to pay for what they did in Central America. The term Banana Republic was coined because of the shenanigans, just to put it very mildly, of these banana companies in league with the CIA in Central America that have left them destabilized and with really poor governance and infrastructure. That's increasing, there was a very recent court case in the news where these companies are now being held accountable for that action and are being fined. Ultimately, those bananas may reflect more of their real cost at the store. I don't know.
Ricky Mulvey: Are there any food trends or trends in refrigeration that you're particularly excited about, interested in that you want to leave the listeners of Motley Fool Money with?
Nicola Twilley: I'm really excited about alternatives to refrigeration and how much better our produce could taste. This actually ties to another trend that I know you've talked about on the show, which is the rise of Ozempic and these GLP drugs. One of the things that's happening for folks who are on these drugs is that they have a greater appreciation for produce. They want to eat produce. Suddenly, a cucumber or a peach is more appealing than a deep fried potato chip or a general sauce chicken. So that's fascinating for someone who is excited about the future of the cold chain, because one of the areas where refrigeration really doesn't do that well is on delivering great produce.
We all know how bad a grocery store tomato is in the winter. It tastes of nothing and is as hard as baseball. That's a deliberate choice on the part of tomato growers to breed for something that can be stored and shipped under refrigeration. Same is true for apples, as stored and shipped under refrigeration, and that is what the breeders breed for, not flavor, not deliciousness. Now, if, and this is a big if, people start demanding more flavor in their produce. Well, guess what. We might need better techniques for preserving our fruit and vegetables. One of the stories I look at in the book is a company called Apeel, which is actually saying they've developed a coating made out of food waste, but in the way it's applied at this nanoscale, it self-assembles into a coating that restricts the amount of oxygen and carbon dioxygen and moisture going in and out of the fruit in such a way that it gives you the same shelf life as refrigeration, but at room temperature. It preserves the good things, the flavor molecules, the nutrients, in your produce better than refrigeration. Now, if we could have this Apeel coated produce in our stores tasting better with more of the nutrients we want, and it didn't have to be refrigerated, that could be a huge win win.
Ricky Mulvey: Nicola Twilley, thanks for joining us on Motley Fool Money. I'm delighted to recommend the book Frostbite to our listeners, and your wonderful podcast Gastropod. I've really enjoyed listening to it in preparation for this conversation. Thanks for being here.
Nicola Twilley: Thank you so much for having me.
Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about. The Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Ricky Maly. Thanks for listening. We'll be back tomorrow.
