P&F:  What are the biggest challenges facing the vanilla industry in the next 12 months?

SB:  One of the challenges will be rebuilding the industry's confidence in using pure natural vanilla. Over the past few years of incredibly high and volatile pricing, availability issues, combined with quality issues, many took huge financial hits and have moved away from using natural vanilla in their current formulations, as well as in new

In most cases, where products were reformulated to reduce or replace natural vanilla, we do not believe that the switch back to natural will happen.

formulations. This interruption in the new product cycle has, and will continue to, limit the introduction of new vanilla extract-based items. During this time, there has been a proliferation of WONF flavors used to replace natural vanilla. These are viewed as more consistent with less price volatility.
     Another challenge will be in maintaining quality. Due to plummeting prices, farmers, unwilling to accept low green bean prices, elected to do their own curing. This is risky, as it is being done by inexperienced people who have not perfected the process. In addition, it leads to multiple small lots of varying quality that make it more difficult and costly to put together larger, more consistent lots. The inexperience can also lead to an increased incidence of “off” flavors and aromas as a result of improper material handling and storage.

P&F:  How have fluctuating prices affected the use of vanilla in flavors and fragrances?

SB:  There has been a significant impact in the use of vanilla in flavors. High prices have caused customers to look for alternatives. In flavors, because the cost of all vanilla was high, the major move was to reduce its use in the formulation. In addition, alternate geographic sources, often with different profiles, were considered as substitutions to save money. Customers often asked for flavors with minimal dependence upon natural vanilla, to control their

It seems a vanilla version is always a consideration for a line extension of many types of products, especially beverage.

cost as well as future cost volatility. In some cases, where vanilla was formulated into the products years ago and did not have marketing significance to the identity of the product, the move to artificial flavors was made. In most cases, where products were reformulated to reduce or replace natural vanilla, we do not believe that the switch back to natural will happen. Lower, more stable costs, better product uniformity and package labeling changes which were made to reflect the changes all serve as factors preventing the desire to go back to natural. This combined with a lack of negative consumer response to the change deem these losses to the vanilla demand as permanent.

P&F:  New products like Vanilla Diet Coke have recently been introduced to market. What other trends do you see emerging with vanilla?

SB:  Vanilla is one of the world's most universally accepted profiles. We see it finding its way into savory and culinary applications. It seems a vanilla version is always a consideration for a line extension of many types of products, especially beverage. There also seems to be a growing interest in organic products. Many growers are moving to get organic certification to address this growing trend.

P&F:  What is you/your company’s background in vanilla?

SB:  IFF has a strong background and heritage in vanilla. The acquisition of Bush Boake Allen (BBA) strengthened IFF. BBA had a more direct extract sales approach, while IFF has years of experience with internal production primarily to support internal use in flavors. BBA also pioneered the cultivation and production of vanilla in India. The combination of the companies resulted in a diverse customer base as well as product knowledge and expertise that complimented each other.

P&F:  How has the vanilla industry changed in the last couple of years? (Geopolitical trends, environmental considerations, distillation methods, sourcing, applications, etc.)

SB:  It seems that many of the large flavor companies have made more of a commitment to vanilla. During the years of very high pricing, smaller players did not have the financial strength to take positions and compete as easily. Many of the small to mid-size companies suffered greatly during these past years.
     There also has been an increased awareness and connection directly with the growing regions by many companies. In years past, companies purchased directly from brokers and traders and had limited knowledge of the local production. Vanilla was a commodity that had relatively stable prices and generally had carryover stocks.

The global supply network has changed dramatically due to the multiple years of high pricing, attracting new geographies into cultivation.

Material was purchased when needed. Today, more annual contracts are executed and significantly more strategy needs to be employed to secure and guarantee high quality material for companies’ requirements.
     Customers also have become much more knowledgeable. When vanilla was it its highest price, purchases were in the millions of dollars. The global supply network has changed dramatically due to the multiple years of high pricing, attracting new geographies into cultivation. This fact, combined with the severe loss in global demand due to the high prices, has created an interesting scenario that remains to be played out. Bourbon vanilla is still considered to be the gold standard, and other options are less desirable. Certainly, different cost structures and profiles offer new opportunities. On the applications side, the proliferation of vanilla WONF flavors, as well as natural and artificial and artificial flavors to replace extract has resulted in a great amount of learning. Vanilla, a complex natural extract, works well in many applications. The move to WONF flavors signaled the need for the flavor to be developed for the specific base and application. For example, one WONF flavor formulated to match a bourbon extract in a particular application proved to not work well in a different system. Customized solutions, base specific, became the norm.

P&F:  Uganda and India are expected to become potential sources for vanilla in the years to come. How will this effect price and demand?

Papua New Guinea is another source with the largest volume potential. During the crisis years, PNG successfully captured a significant portion of the gourmet vanilla market.

SB:  Increased supply always helps keep prices lower. Material from these regions can not be called Bourbon vanilla. In addition, the profile of the aroma and flavor is different. These factors provide limitations to the direct substitution in many uses. However, these materials do offer opportunities to take some pressure off of the bourbon supply. Uganda has long been a source for extract and gourmet grade vanilla. India is a developing region, spurred by high prices. It remains to be seen what the future holds for India with the now lower prices.
     Papua New Guinea is another source with the largest volume potential. During the crisis years, PNG successfully captured a significant portion of the gourmet vanilla market. The profile from this region is different than Bourbon vanilla, as both V. planifolia and V. tahitensis are grown here and not kept apart. The resultant profile has been accepted in the gourmet market but not to a great extent in the extract arena.