Vanilla bean sourcing : sector in crisis

Longly estimated on the world market, Malagasy vanilla bean sourcing today see its development prospects more limited.

The vanilla bean sourcing crisis affects its development and life. Between boom, price crashes and bad practices, the “green gold” of the Big Island has lost in quality. It loses its credibility with many traders, too. Nobody tells about ts elimination from the global aroma industry yet. However, recent developments in the sector because of the gradual increase in the production of artificial vanillin, force the various players involved in sector to rethink a sub-sector whose golden age seems to be over.

Vanilla bean supplier grow on nearly 65,000 hectares in the north-east of the country.

A place of choice in global vanilla bean sourcing

First of all, to understand the current crisis in the global industry, we must return to the important place occupied by Madagascar in the vanilla supply of the world aroma industry. Indeed, the Big Island alone provides more than 80% of the global production with  around 2000 tons per year.

Secondly, socio-economically, it supports more than 80,000 farmers. It contributes 5% to the GDP of the country, too. The vanilla sector saw its export earnings increase from $ 58 million in 2000 to $ 114 million in 2014. In other terms, around 39% of the global value of Madagascar export market.

Chronic instability of prices

Given its reputation, the Madagascar vanilla suppliers determine the price on which all other members of the industry value chain are expected to align. This “price-taker” role has put many players at the mercy of the price instability. That has developed since the beginning of the 2000s which maintains the disenchantment with this bean.

From less than $ 50 / kg in 1999, the price of the premium vanilla bean will rise to $ 350 in 2002. Then to $ 500 / kg in 2003 a level never reached. This surge in prices will lead to a boom in plantations in Madagascar. The entry of new players such as India, Uganda, Papua New Guinea, into the production of premium vanilla bean born. This speculative movement will develop a global supply of more than 2400 tons in 2004.

Meanwhile, vanilla bean sourcing industry start the development of synthetic vanilla. It’s the main molecule that gives the vanilla flavor) to improve profit margins.

In 2005, the spiral stopped abruptly for lack of demand. Prices collapsed to $ 25. They will remain relatively low until 2013. Then the rates will gradually increase again: to $ 100 in 2015, then to $ 200 in 2016, they will reach in 2017, the peak of $ 425 because of the tropical cyclone Enawo. In particular, this episode affected 30% of the Sava vanilla plantations, according to estimates by the National Association of Vanilla Exporters.

Quality at half mast and reputation ruined

If, with the sudden fluctuation of its prices, the reputation of the Malagasy vanilla has taken a hit. This situation will be especially aggravated by the development of poor cultural practices motivated by profit in the short term. Which contributed to the decline in the quality of the madagascar vanilla bean. These include the harvesting of green vanilla by growers before they reach maturity. Note that, it can take 9 months after pollination for the vanilla to ripen. This process leads to a decrease in the percentage of vanillin, the molecule responsible for the aromatic power. Typically between 1.6 and 1.8%, the vanillin level could fall to only 1%.

Another practice involved is the runaway pods under vacuum. This technique helps conserve moisture for a longer time and increase the weight of the orchid to attract better prices. In addition to affecting the vanillin content, the method promotes the development of new chemicals that affect the aromatic profile of vanilla.

“The price of vanilla should remain extremely high in 2018 when the quality should be bad. We anticipate that this low quality should continue until there are new suppliers on the market, “says Jeanne Baker, marketing manager for Rodelle, one of the world’s leading importers of Madagascar vanilla.

Synthetic vanilla bean on the lookout

The synthetic vanillin sector was the big winner of the natural vanilla crisis in Madagascar. It has become the main bulwark of the industrialists against the torments of natural vanilla produced in Madagascar, cumulating several interesting characteristics for the manufacturers of flavors.

“The main advantages of synthetic vanillin are price and reliability. It is always cheaper and more abundant than natural vanilla. In addition to that, the product is not subject to years of good or bad harvests. The composition of the synthetic vanilla can remain stable for a whole year. It can be adapted to the needs of the customers “, explains to the Ecofin Agency, Chris Richard, sales director of Aust & Hachmann Canada, one of the main vanilla merchants of the world. “Synthetic vanillin has many more flavors compared to the natural vanilla available on the market,” adds Jenna Baker.

Today, it is estimated that the market for artificial vanillin is 10 times higher than that of its natural counterpart. World production of industrial vanillin would be between 12,000 and 15,000 tons per year. The molecule currently costs 15 times less to produce than its natural counterpart.

Biosynthetic vanillin more and more famous

Faced with these advantages, many initiatives have developed in recent years. In 2014, the Swiss synthetic biology company Evolva announced its desire to produce vanillin from glucose through yeast fermentation. This biosynthetic vanillin could capture up to $ 360 million in the global flavor market, according to the company. For the time being, this marketing is still hypothetical since, no major advance reported by vanilla bean sourcing industry.

More recently in 2017, the Japanese flavourist Hasegawa, in partnership with his compatriot Ajinomoto, announced the development of a substitute synthesized from fermented sugar. According to the companies, this biological substitute would perfectly replace premium vanilla bean. This thanks to its almost impossible to distinguish aroma.

Madagascar vanilla bean sourcing in danger of extinction?

With the rise of manufacturing synthetic vanillin, madagascar vanilla bean could face decisive choices in the coming years to ensure its survival. It’s although whose supply was crucial for the industry. The outlook for growth and profitability looks much smaller over the long term for the industry. And for good reason. The actors of vanilla bean sourcing face an obvious equation: more competition, less revenue, less growth.

For Mr. Baker, the government that has liberalized the sector since 1995 should regulate the sector through the implementation of laws and standards. This will improve the growing and ripening conditions of the vanilla pod if Madagascar wants reconnect with the past reputation of Malagasy vanilla. “It is possible that synthetic vanillin surpasses natural vanilla if the quality does not improve. This because today artificial flavors are better than pure vanilla bean.