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It's Crazy What This Commodity is Being Sold For!
By: Chris Tell at: http://capitalistexploits.at/
Internally we have a running joke here. We talk of the "Yeti" deal. Like the Yeti, everyone has heard about the deal but few have seen it and the longer this persists the greater the doubt that the "Yeti" actually exists.
The "Yeti deal" is a deal I began work on with a good friend and adviser to Seraph.vc in the middle of last year. Our syndicate members have heard a lot about the deal but as I said, for a number of reasons it's not come to the stage of being investable... yet. The deal involves coconuts, coconut water to be precise.
We began due diligence nearly a year ago on a particular company which shall remain anonymous, landed up restructuring their existing corporate structures, shareholders, company domicile, rebuilt their financials, and a host of other things required, in order to both fully understand the deal, as well as ensure it was suitable for both ourselves and our syndicates' capital. Suffice to say, it has been a long, though very interesting journey.
During the course of this due diligence process, we've learned a heck of a lot about coconuts and our strategy to participate in this exciting space has changed materially as a result.
Coconuts are truly fascinating for a number of reasons, not least of which is the ability to price taxis in most any Southeast Asian country by asking the taxi driver what price a coconut sells for in the wet markets. There is a pretty consistent ratio between the price of a taxi trip in downtown Bangkok and that of a coconut in a Bangkok wet market. The same is true of the price of a taxi in Colombo, and what a coconut sells for in a Colombo market. Ditto Jakarta and Manila all countries which produce a lot of coconuts.
Aside from double checking if your taxi driver is screwing you by using the "coconut barometer" let's look at the products and uses for coconuts as a preliminary.
- Water - Nutrient packed with zero fat and the same electrolyte balance as our blood plasma.
- Oil - Here is a commodity which has been globally traded for over 50 years. Increasingly used in pharmaceutical industry, coconut oil has been used to treat Alzheimers, is anti-viral, anti-fungal, anti-bacterial, anti-microbial. It's also an incredible anti-aging supplement taken both internally, and when used topically on skin, hair, and cuticles. Studies also show that it improves metabolism significantly when taken daily. It's also been proven to be anti-inflammatory and one of nature's most potent burn creams. It's also an incredible anti-aging supplement taken both internally, and when used topically on skin, hair, and cuticles. Studies also show that it improves metabolism significantly when taken daily. It's also been proven to be anti-inflammatory and one of nature's most potent burn creams.
- Activated carbon - Though I religiously take activated charcoal when traveling, it was only when doing research on the industry that I found that in fact the highest quality activated charcoal comes from coconuts. The activated carbon is used in water purification. You know that black stuff in your water filtration system? Yep, that's it.
- Lauric acid - used in cosmetics and soap manufacture.
- Meat - Food. Plain and simple.
- Biodiesel
- Milk - Tom yum goong anyone?
- Fibres - Wow, there are literally a multitude of products we've seen in this space. Everything from making mats to mattresses, to using fibres as an alternative to plastics.
- Husks - used as fertilizers and biomass.
- Coconut sugar – Has a low glycemic index score that is roughly half that of white sugar, and tastes amazing, so it's a positive solution for those watching sugar intake.
- Coconut flour – Gluten free and hypo-allergenic, ideal for baking, with lower in carbs than conventional flours, with the highest amount of dietary fibre (58%) of any flour (twice that of wheat flour).
We've long been proponents of investing in agriculture and have mentioned it many times in posts on the site and in our crash course, which provides a bit of an overview and insight into our investment thesis.
In any event, the numbers are hard to ignore, so when I think about coconuts the one thing that stands out is that with a coconut palm you're literally growing water, food, and other resources together. In a world where water is such a scarce and valuable commodity this is particularly intriguing. Investing in water is problematic not least of which because parasites... ughh. I mean, governments can and will so easily commandeer it in times of crisis. I struggle to see them doing that with coconut plantations though nothing would surprise me anymore.
Coconuts enjoy a hot humid climate and grow in the tropics and sub tropics, which often means that many of the countries where coconuts are grown, water in fact demands a premium - clean drinking water, that is. In most of Southeast Asia, central America, South America and the Caribbean you can't drink the water from the tap without getting violently ill. When you're drinking the water from a coconut you never have to worry about whether its going to make you sick or not as the tree strips all impurities out.
In fact, further to the above point, while its not necessarily a marketable point, we've spoken with agriculture professionals, including a professor of agriculture, who claim that there exists no discernible difference between organic coconut water and non-organic. This is because the tree is so efficient in extracting impurities that the water found in the nut is identical. The soil which the palm trees are grown in shows a difference between organic and non organic but not the coconut water found in the nut.
Let's take a look at some of the numbers involved in getting you that lovely refreshing bottle of coconut water, fresh of the shelf of your favourite supermarket:
You'll get approximately 22 trees per rai (there are 2.5 rai to an acre). A good tree will produce 120-150 nuts a year so let's be super conservative and work on 100 nuts a year. Each nut holds roughly 300ml. (bearing in mind the younger the nut the sweeter, and larger nuts hold more but are more sour in comparison). So each rai will produce 30,000ml x 22 or 660 litres a year. Bear in mind it'll take about 3-4 years for a tree to reach full capacity. They grow very quickly.
Now consider that Harmless Harvest, a US based company who source their coconut water from Thailand, sell their coconut water for between US$6.49 and US$7.99 per 500ml bottle, at Whole Foods in the US, and one nut in the Bangkok wet markets goes for between 8 and 20 baht (depending on time of year). At roughly 30 baht to the USD this means 300ml sells for between US$0.26c and US$0.66c. Now their exists bottling, logistics and HPP involved so it's not all profit but the rough cost is under US$1. Nice, huh?
With demand continuing to grow as the overall coconut water market expands, while US cities continue to experience drinking water price increases due to droughts that threaten cities like Las Vegas, it's not difficult to imagine moving 50,000 or even 100,000 bottles of coconut each week.
Let's put the two together now, shall we? Assuming 660 litres per rai and an end consumer price of US$13 per litre ($6,49/ 500ml bottle) we're looking at $8,580 gross from just 22 trees on one rai of land. Now I'm not going to delve into the price/rai of agricultural land in Thailand, simply because it varies greatly depending on location, quality, etc. I will say though that if Thai farmers were receiving anywhere near this for their coconut water, let alone all the other products from a coconut, they would all be driving Maserati's not Toyotas.
The money comes from commoditizing it and moving product from grove to grocer – the biggest spread isn't growing the underlying nuts, but controlling the nuts from co-op onward (in our opinion). There is SIZABLE profit in coconuts – but the farmers don't make it.
Attentive readers will understand quickly what we're investing in, and why we've taken so much time to delve into this market and understand it from the inside out.
Looking beyond the coconut water, let's take a nosy at activated carbon.
When first looking at activated carbon I was stunned!
Take a look at the prices of activated carbon being sold on Alibaba. You'll notice it's selling for up to US$2,000 a metric ton. Now I've lived in Southeast Asia for years and one thing that is extremely common is a sight such as this:
Yeah, they're burnt simply to get rid of them.
For the most part coconut husks are treated as a liability. In fact, the company we began due diligence on actually pays someone to come and take their husks away for them.
Now consider that activated carbon sells for up to $2,000 a ton.
This is nuts (pun intended)! My guess is that the average coconut farmer has no idea about such things as activated charcoal.
Let's take a commodity such as zinc, for example, which requires a complicated process to bring to market. Unlike coconuts, it doesn't just grow on trees on the side of the road. First, an ore body needs to be identified, geological surveys conducted, a mine built and then the zinc needs to be crushed to powder, treated by froth flotation which is a process involving about 50% zinc and the remainder being sulphur, iron and silicon dioxide. Then with roasting the zinc in this concentrate it becomes zinc oxide. This crude zinc oxide is then turned into a metal using thermal smelting or eloctrolytic refining.
I haven't even mentioned the costs associated with building the infrastructure so often required to extract zinc, as its not typical for ore bodies to be found conveniently next to railroad tracks, barges, or highways. Then there are the environmental impact assessment reports and the like involved in ultimately getting to our US$2,180 per tonne, price point which is what it is what it currently sells for on the LME.
The one thing that I absolutely love about my work is that what I inevitably start investigating so often involves opening up doors of opportunity and knowledge I had yet to identify existed. It's enough to make anyone feel alive and like a child again.
At our upcoming Seraph Aspen Meet Up we'll be covering the company we, together with our members, will be investing in very shortly targeting the coconut water market. The management team, together with many of our portfolio companies, will be meeting with us for a private and intimate meet in a stunning Aspen resort.
If you've ever wanted to build your own private equity hedge fund this private meet up provides an excellent opportunity to look into what we're all about.
- Chris
"Eat coconuts while you have teeth." - Singhalese proverb
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To clear some confusion over the price discrepancy between Harmless Harvest coconut water and others:
Harmless Harvest is not heat pasteurized and must be kept refrigerated. It is without close second the most delicious coconut water I've ever tasted. I guzzle other coconut water, Harmless Harvest I sip like fine wine.
My daughter, who's in her mid 20s, switched to using virgin coconut oil for skin care six months ago. Said she got rid of most of her skin care products and her skin has never looked better. She uses it on her hair with similar results. She has a friend who started putting it on at night and got rid of dark circles under her eyes which she'd had for years.
Some interesting facts:
Saturated fat in cocunut oil is almost all medium chain which you body handles very differently burning something like 80% for energy.
They tried to fatten pigs with coconut oil and it didn't work. If you want somthing fat, feed it corn oil.
Coconut oil is stable at room temperature for about three years.
It is also stable at high temperatures and is an excellent frying oil--try making popcorn with virgin coconut oil sometime. Virgin coconut oil retains the coconut odor (and many nutrients).
Corn oil and many other vegetable oils break down at high temperature, also turn rancid at room temperature and in either case become somewhat toxic.
So they decided coconut oil was evil because of "saturated fat" and foisted corn oil on us. Monsanto and ADM don't control coconut oil so maybe that played a part--along with ignorance.
Yep coconut oil is really amazing stuff. People in Thailand use it for everything.
Especially in their delicious curries! I should have mentioned that there is a very low incidence of vascular disease among populations who are heavy consumers of coconut countering the simple minded "saturated fat means high cholesterol and heart disease" misconception which led to the 50 year bad rap on coconut oil.
From the title, I thought they were talking about inkjet printer ink cartridges.
I see this confab is being held in Aspen, CO where a decent house starts at $2 million. This is 1% HQ and Doug Casey will be at this confab.
That's also where the environmentalists meet to plan how to restrict the serfs from ever having a place in Aspen.
Anyone want to buy a bridge, I'll throw in some coconuts.
Hey mister tally mon tally me banana, weekend come an me wan go home.
There must be some "weird trick" to this. You can buy coconut water on Amazon for 12 cents per fl oz. That works out to about $4 per liter. You won't be getting $13 per liter for very long so you should work that into your calculations.
Very intriguing investment opportunity! I especially like the effort to identify possible additional value extracted from the production process.
That is a great idea worth sharing!
It is my opinion that as the open source evolution continues to unfold it will allow for new applications of the by-product from our productive processes. Things like alternative fuel sources, bacteria, gases, and even coconut husk, could be integrated with new technologies and cross-contamination of enterprise to allow for extra revenue steams to be developed from existing productions. One of the finer traits of capitalism in action, this is a movement worth noting.
Acapulcoco made by Calahua is a great brand of coconut water I am currently sipping on to mitigate a red wine hangover. It's available at COSTCO here in Mexico and is becoming quite a fad. I buy it by the case and am sold on all the health benefits previously discussed. I don't know if its available in the U.S. yet.
http://www.superama.com.mx/superama/Detalle-de-articulo.aspx?upc=0750300...
Brudder bought a coconut.
He bought it for a dime.
His sister had another one.
So she paid it for a lime.
Let us not forget that coconut shells make for very lovely and exotic-looking feminine breast support devices.
Indeed! On a recent sailing trip, Mrs horseman made this set...and the skirt...and the jewelry, all while lounging on a beach with me.
Ford was looking at using husks in automobile panels...
An industrious woman for sure. But she'd almost certainly be more comfy without the coconuts.
Filipinos use coconut husks to fuel electric power generators. Small islands are not connected to the power grid. The small communities located on these islands produce their own power. For them the husks are valuable as generator fuel. The conversion process from solid husk to a flammable gas that burns very well in an internal combustion engine also produces charcoal as a by product. A gasifier like those used in WWII makes this husk to syngas conversion possible. Construction of a Syngas Generator is simple and anyone with any skill in metalworking can easily build one. Here are detailed plans for building one.
Do you want to be a wage slave ???
https://www.youtube.com/watch?v=Lad5bc6Gpb4
The Coconuts !
I learned a lot about coconuts while living in Puerto Rico during my younger surf commando days. Between swells, we went to the coconut grove down the beach to climb trees and get the green or "wet" nuts, about six clumps of maybe six nuts nuts each from a tree. The youngest nuts at the top had no meat, but were slap full of water. In the progressively-riper clumps, the wooden shell started forming inside with jelly, then soft meat, then hard meat, and the pure water turning into sweet milk. We lowered the clumps down by rope, since the youngest nuts would split open if dropped too far on hard ground. They are heavy as $#!+, so we would try to get a gringo with a car to haul them back to the compound. The next day, we would hike to the top of a neaby hill and collect "dry" or fully-ripened nuts that had fallen from the trees for the meat. We attempted to extract the oil from the meat, but never quite got it right. We kept a pile of wet nuts in a corner and a machete at the front door, so any time we were thirsty, we grabbed a nut, chopped open the end and chugged the water, winging the empty nut into the jungle for the rats, which provided an ample supply of meat for our cat. We also made drinking cups from the wooden shells inside and also carved tiki idols from the husks. Coconut trees are truly amazing plants and there are many ways to make FeRNs/Euros/Yuan from them.
Sheesh. "activated carbon"? Is that some kind of synthetic diamond?
This guy says he's investing money in the stuff and he doesn't know the name of it.
He's talking about ACTIVATED CHARCOAL made from coconut husks. But after it's processed and meets the CAS or USP standards, it doesn't matter what plant material was used.
CHARCOAL, Activated Granular, 4-12 mesh. CAS 7440-44-0. A.W. 12.01
CHARCOAL, Animal Powder (Bone Black) CAS 8027-91-6. A.W. 12.01
CHARCOAL, Coconut, Activated 8-30 mesh CAS 68647-6-9. A.W. 12.01
CHARCOAL, Wood, Powder, 4-12 mesh. CAS 7440-44-0. A.W. 12.01
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So the CAS # for just plain activated charcoal is the same as activated charcoal made from wood, which means that the stuff is often made from wood. But coconut sourced activated charcoal has its own unique CAS #. And some people might want it from animal bones, not plant material.
Maybe the coconut sourced AC has some desirable characteristsic after all.
Still. If you go into a chemical supply house and ask for "activated carbon" they'll think you don't know anything.
https://en.wikipedia.org/wiki/Activated_carbon
"Activated carbon, also called activated charcoal, activated coal, or carbo activatus, is a form of carbon processed to have small, low-volume pores that increase the surface area available for adsorption or chemical reactions.[1] Activated is sometimes substituted with active."
We've been into some of the largest production factories producing this and the term charcoal and carbon are being used interchangeably. Maybe you're referring only to the US or one single market? Worlds a big place and not everyone uses the same terminology.
I have a can of coconut water everyday, chilled with ice, simply because it tastes great and I dont drink soft drinks, try it.
Seems I'm being super healthy, who would have thought it.
A 24 can box of (520ml) 17.6fl/oz cans costs $28 Australian a box.
1. Now Foods sells a product called "MCT Oil" (mediumchaintriglycerides), which is coco/palm mix. It is very easy to use for the benefits of this type of fat--it is easier to use than a tub of coconut oil, for example. You can buy the product many places. Ease of use is a big deal because if not, then you won't get around to actually consuming. You could keep on hand both the MCT Oil and the virgin coconut oil. It is said that MCTs are metabolized very easily and therefore save the demand upon enzymes what all other fats require.
2. Don't know of any coconut farms that are listed, but Feronia is a palm oil commercial-farm as well as some other types of farming. Operation in Africa, DRC. The shares just did a r/split, so look for the most opportune entry and now that the outstanding is shrunk. ... if the price of coco commodity is indeed insanely low, then in light of this one might take a charitable look at Feronia. (coco & palm are economically substitute/complentary goods, no?)
3. ClifHigh the webbot prognosticator at HalfPastHuman (and on YouTube), was recently mentioning something about a coming problem with the coconut supply. Then there was some news which followed about a blight affecting cocos in Philippines.
4. since many of you here are pagan, it should be mentioned that coconut oil is the superior lubricant for what they do at the SEC during the day to take the edge off. The viscosity is perfect and it is not greasy, but it is hydrophillic therefore absorbs into skin. And because of its antibiotic properties (cf. monolaurin), it might have additional benefits such that if you are ever caught with your pants down you can claim what you are doing is for medicinal purposes.
Not to forget the band Kid Creole & The Coconuts featuring Coate Mundi.
Those coconut mammy holders were very fetching and with song lines like 'Oh Annie I'm not your daddy, 'cause if I were in your blood you wouldn't be so ugly,' Classic!!!
You need to retag the coconut water market to the Brawndo market, because it's got electrolytes!
Probably takes five tons of raw husks to make one ton of charcoal, packaging doubles the cost, transport doubles it again and again, and there you are: not rich.
But I like coconut just fine, and I'm suddenly hungry for some fun-size Mounds bars.
3 tons raw to produce 1 ton activated charcoal.
If that were true they wouldn't be selling by the tons to industrial filter makers all over the world. Coco charcoal has some unique properties that make it superior for removing scent molecules from air as it passes through the carbon media.
The filter in your refrigerator probably uses coco charcoal as it is excellent for water treatment too.
These guys will happily sell you 22 tons in 1 container if you need it.
http://www.buyactivatedcharcoal.com/activated_charcoal_bulk
I do love me a couple of funsize mounds.
In the Ranch 99 Markets in Southern California 500 ml sells for $1.00/can.
Seems a bit far fetched to start a hedge fund with guys that are in love with coconuts. There is something to the charcoal angle, but aren't other pulp products easier to source? What is the cost of bringing over a container of coconut hulls and then having some hippy on a beach burn them up in a two week long bonfire?
Maybe if you could get some hippies on a beach down south to burn them and scoop up the ashes and load them on a container ship you could have something. But I'd bet it could cost more than it's worth to haul the container to port and ship it north. Of course you'd have to have some dude who knows his charcoal from his ash separate the gunk. My guess it's still not a worthwhile project.
But hey. It's always good to hear other ideas. Even if it's the "Yeti" project.
The hippies are the ones buying the activated charcoal to filter the smell of their pot farms and using the coco fiber or coco coir as a hydroponic medium to speed weed production.
They then use the coco-oil which at room temps is hard to make cannabis butter to bake into healthy stoney treats.
The world wide cannabis culture is worth multi-billions and an increasing amount of that money is going into coco plant products as a result of the boom in palm oil production.
The production rates of palm products is so high that it's threatening natural rain forests in Indonesia and Malaysia as farmers slash and burn forests to plant palms because of their high profit ratios relative to other crops.
that's all fine and dandy, i just wanna know when they are going to make hemp fiber bottles to put it in.
So what was the Taxi to Coconut ratio?!?!?!? you missed out the only bit I kept reading for!
1 x coconut = 1km?
They call it the "wet market"...ewwww. It just sounds so gross. Could have called it the liquid market.
Coconut milk is hip but in a tight economy a glass of tap water will do. I live in Vegas and on a well. the water is fine. Even city water is OK unless you get a blast of freshly chlorinated water.
Coconuts are indeed a great product and I agree they have potential as you described. The idea that coconut water will replace drinking water is what is nuts. Sure it could become a fad like 'gluten free' is now but in the long run I don't see it happening as you describe. Why ship water plus whatever else in in coconut juice across the world? It is a waste of shipping resources. After the fad you will have a commodity and hopefully you will have a good brand.
I don't think Coca Cola is worried.
Coconuts don't make water out of nothing... if the area in which they are grown runs out of water, no coconuts.
I have seen the inside of city drinking water reservoirs. Ok is a generous evaluation of those operations.
This:
fad like 'gluten free'
Gluten free is not a fad, it is a reaction to the large increase in the amount of celiac's disease found n the population.
You're in Vegas. Is it true what I hear on the TV, that y'all are gonna run out of water like tomorrow?
Coca-Cola pretty much waits for the upstarts to gain/prove market share in a given demographic before buying them out.
Here's a list of product.
http://www.coca-colacompany.com/brands/all/
Replace Coca-Cola with "pretty much any billion dollar multinational".
Thats how the Oligarchs stay up top, don't you know? You sell them your company for the sum of 15 years profits, they run said company for 45 years +.
Good idea!
Trader Joes is the only place that I know of that sells coconut oil in liquid form and as a packaged spray. I think USFuckinAye banned it from use by theaters on popcorn back in the 70's because it made Tipper Gore's pussy fat or some other bullshits. They also banned toilets that actually flush and light bulbs because their existence made obama and his kenyatta family feel genetically inadequate.
That was actually hydrogenated palm kernel oil.
http://inrfood.com/ingredients/1380
For the record, Tipper always had a fat pussy. Also Kenyatta, is that something you hang on a rope and beat with a stick?
How do either of you know so many details about Tipper's fun tunnel?
I love this site. Somehow Tipper Gore's fat pussy got woven into a discussion on activated charcoal and palm kernel oil.
Classic.
Like a rented mule. Oh wait...
big shout out to our friend Sal T. Nuhts
Can't believe nobody else is thinkin' of this.
http://www.youtube.com/watch?v=nf670orHKcA