Firmenich weathers the vanilla supply storm with diversified sourcing
The cyclone hit Madagascar in March this year prompting the government to declare a national state of emergency. It caused 81 deaths and around $20 million of damage, according to a UN report from 17 March.
It also damaged the country's vanilla orchids, spelling further uncertainty for growers in an already fragile supply chain and driving world prices upwards. Madagascar is the world's leading producer of natural vanilla pods.
“The vanilla bean market has suffered several consecutive crises, so today’s surge in prices is not only due to Cyclone Enawo,” Benoit Petit, vice-president of end-to-end naturals at Firmenich, told FoodNavigator.
The global vanilla pod market is no stranger to supply disruptions and volatile prices. In 2003 prices skyrocketed to $500 per kilo fueling investment into other origins which then caused the per kilo price to slump to $20, a price Firmenich condemned as “derisory” and which prompted many farmers to considered abandoning vanilla and switching to other crops.
“Indeed there is no residual inventory left from previous crops. Prices have been multiplied by six since 2014, but price is only one part of the equation. A bigger risk today is shortage, hence why we have developed our natural vanilla flavours.”
Firmenich’s experts on the ground have given an initial estimation of between around 20 to 30% crop damage to the 2017 supply. “[But] it is difficult to assess how badly the vanilla vines have been damaged in terms of future crops,” Petit added.
Petit said its alternatives to the natural vanilla orchid, which is the second most expensive spice in the world after saffron, can be listed as ‘natural vanilla flavour’ under EU labelling rules and meet the market’s expectations for clean label.
The firm would not reveal source of its natural flavourings but common alternatives include artificial vanillin which is synthesised from wood or petrochemicals.
Meanwhile, efforts to diversify vanilla sources to other countries such as Uganda are already having an impact on prices, Petit said.
“Other regions have started to plant vanilla vines but it takes three to four years plus a lot of manual work to harvest the first vanilla beans. Other countries started planting vanilla vines two years ago, so we expect to see significant additional volumes for the 2018 crop, and especially the 2019 crop.”
The Swiss flavour house, which reported a turnover of 3.2 billion Swiss Francs (€2.9bn) for the first half of 2016, said it is committed to responsible and sustainable sourcing of vanilla pods.
Firmenich guarantees a minimum price for the pods it sources, paying more than the market price when it is low so farmers are not exposed to fluctuations, although it did not say what this minimum price is.
The company also said it is trying to "turn the vanilla challenges into opportunities" for farmers exploring new business models and sharing best agricultural practice. Focus areas to improve the cultivation itself include using different crop varieties, crop rotation, soil management, promoting alternative cropping and providing farming training.
Firmenich has operated in Madagascar since 2005 and works with the Savanille cooperative that brings together 2,800 vanilla farmers across 38 villages, and has invested in improving the living conditions of its Madagascan growers with a number of initiatives including building drinking water wells, schools and a medical dispensary.