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In the May issue of P&F magazine, we approached suppliers and formulators to offer their feedback on the state of vanilla. As the political crisis in Madagascar drags on and the overall financial climate sours, we ask: what is the current state of vanilla in F&F and what will it be over the next 12 months? As part of our continuing online conversation, we offer the first in a series of Web Exclusive insights. Send us your thoughts and feedback here.
Madagascar has been politically unstable for many years. The situation tends to ebb and flow with the election cycle, which tends to bring on the crises. Things have not changed for many years.
That said, these upheavals do have a short-term impact on the availability of vanilla beans, but the product always makes it out to market, one way or another. It is my feeling that the political situation has little overall bearing on the price or availability of the beans. To understand this, one must look at the reality of vanilla cultivation.
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The vanilla supply chain is very fragmented with a very large number of small farmers involved at the beginning of the process. The vines grow in remote places where the beans are gathered by farmers. Collectors then buy the beans from the farmers, which are, in turn, sold to exporters, sometimes by way of brokers. The link between the farmers collecting the beans and the political situation in the region is surprisingly small. What does impact price is supply and demand. While it is true that the farmers collecting the beans may not gather as much if they feel they are putting themselves in danger, by and large the supply—and therefore, the price—is impacted by issues like speculation and climate and its effect on crop yield. For example, a massive typhoon wiped out the crop in 2003, spiraling prices from $20/kilo to $500/kilo in one season. While political turmoil may affect the ability of an exporter to get the product out on a timely basis, eventually, most of the beans make their way out, one way or another.
Another consideration on the vanilla trade is price. It must be noted that, in order to produce beans, the plants must be hand-pollinated. This is a laborious process that the farmers engage to different extents depending on the market prices. If the prices fall below a certain level, the farmers lose motivation and may not hand-pollinate, thus impacting the yield for that season and driving prices up. Ironically, when market prices are high, the farmers tend to over-pollinate the vines, resulting in high stress for the vines and a smaller crop than intended for a two-year cycle.
Given the number of variables that can quickly affect the price of vanilla, the wise F&F house will hold a significant supply as a hedge against price variation and ensure supply sources from multiple regions.
With regard to organic certification, most vanilla by its nature is organic. However, the certification is costly so it is rare for exporters to go to the trouble. That said, there is a niche market for organics, particularly in dairy applications, and we do not anticipate this changing.
On the fair trade front, there are food manufacturers for whom this is an important part of their brand positioning. More and more, consumers are concerned about the conditions under which the food on their plates was grown and processed. But right now, as the world experiences the biggest economic contraction in 60 years, consumers are more concerned about being able to afford to feed their families, fair trade or not.
Today more than ever, cost is a key driver in product formulations. Consumers are getting acceptable vanilla profiles in many different, more cost-effective forms, from artificial and natural to extracts and even organic, for classic vanilla flavor categories of ice cream, yogurt, confectionery, baked goods and beyond.