Silkworm larvae, known here as bundegi. Its unique smell is difficult for me (and I think for most westerners) to take, but it's a popular snack and is sold in grocery stores too.
This woman caramelizes the sugar in the little pan, then plops it on the flat surface and flattens it with the round implement, immediately thereafter imprinting it with one of the cookie cuter shapes.
That looks like a heavenly environment! I can't wait!
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