Expensive orchids: vanilla prices and the consequences

The weather and rising demand are driving up the price of vanilla pods. The spice is not yet worth its weight in gold, but a kilo is currently much more expensive than silver. A natural substitute doesn't exist, and quickly raising production levels is not an option.

The pods have become expensive

The current price for a kilo of vanilla is 600 euros; for good quality end customers are likely to pay as much as 800 euros, depending on how much they buy, which is considerably more than they would have to pay for a kilo of silver (460 €). Four years ago, the price of the pods was around 30 euros per kilo. This price explosion is a big challenge for organic manufacturers who have always rejected the use of synthetically produced vanillin. Organic food is permitted to contain only “natural flavouring” and “extracts of flavouring substances.” This has been regulated since 2004 by the BNN Flavour Recommendation. However, the EU Organic Regulation permits the use of conventional natural vanilla flavouring in organic food, which is placed by the BNN Flavour Recommendation in Category k2. “Limited use in foods and beverages when no organic flavouring is available,” is what the Bundesverband Naturkost Naturwaren says. In response to our enquiry, the BNN explained that so far it has not observed a shift to less expensive variants of flavouring. Also, the association has not had any requests to relax its recommendations.

Rapunzel sources its vanilla from a partner on the Comoros. (Photo © Rapunzel) 

Looking for the cause: the cyclone and the trend to genuine vanilla

Two factors are driving up the price. On 7 March at around 12.30 in the afternoon, the cyclone Enawo struck Madagascar and caused a great deal of damage. According to estimates of the vanilla industry, its trail of destruction included 20 to 30% of this year's harvest, and that's in a country that supplies 60 to 80% of the worldwide demand for vanilla. The German company Heuschrecke gets its organic vanilla from three small-farmer cooperatives in Madagascar. In a statement, Heuschrecke explains: “Although our organic bakers, ice cream makers, etc. are already moaning, it's impossible to know how high the prices will rise – contract offers are going up from one week to the next (…) concluding a contract means at the moment committing to a six-digit sum. We hope the farmers won't experience a sudden price collapse as they did when it hit rock bottom some years ago – we hope their incomes stay at a sound level so that the traditional vanilla industry continues to be viable.”

Apart from Madegascar, Bourbon vanilla is cultivated only on Réunion and the Comoros. This means that between a quarter and a fifth of the global harvest has been lost. Organic vanilla is affected just as much as vanilla from non-organic sources. According to Gepa, prices in recent months have developed in parallel.

At the same time, demand is still rising and it's making the consequences even worse. “The trend to authenticity, to naturalness continues unabated in the USA and Asia in particular, but also in Europe,” explains Heinrich Schaper, head of the flavours division at Symrise, a company specialising in fragrances and flavours. So, alongside conventionally grown vanilla, Symrise offers organic fairtrade vanilla. This company alone now takes about 10% of Madagascar's vanilla harvest. In the same way as Rapunzel, it secured supplies to cover its need in good time. It doesn't expect there will be any bottlenecks in supplies. “We're benefiting from the fact that we've been cooperating with our partners for a very long time,” says company spokesperson Eva Kiene. In the case of Voelkel the amounts in their seasonal hot beverages are so small that company says it is not planning to change its recipes.

A question of pricing

They've been lucky, because the message from the food industry is that products containing genuine vanilla are now starting to disappear from the shelves. So Oatly, on account of the high prices, is now using flavouring in its vanilla oat drink. Weiling has already reacted and removed the product from its range. “We're not going along with this,” explains Weiling spokesman Hanjörg Bahmann. In the case of other manufacturers too, it's a question of profitability or pricing, because they can't simply carry on raising the price – for vanilla biscuits, for example. “From a certain price level you have to look at all your recipes to see how you can make the product more economically without compromising the quality,” explains Lars Schyperski, responsible for purchasing at Bohlsener Mühle. It's not necessarily the case that you can only make savings in vanilla. It may be that we can find substitutes for other ingredients as well. If the worst comes to the worst, you have to pull the plug. “If the price rise for a particular raw material is permanent, we have to pass it on to the customer,” Schyperski maintains. If the cost becomes too high for the consumer, the product won't be on sale much longer.

There may well be a shortage of baking ingredients in the shops too. Retailers who have not stocked up in time could find themselves without spices when the time for making your own Christmas cookies gets under way.

The quality is deteriorating

Christian Terno has noticed another knock-on effect: the quality of the vanilla is going down. He has observed that in some cases the farmers have harvested the pods too early, with the result that the vanillin content is too low. Terno runs the online spice business Madavanilla. Relatives in Madagascar supply him with vanilla. He also knows it's Bourbon vanilla that is something very special. “Tahiti vanilla has a quite different taste and can't be used as a replacement,” he explains. Vanilla is currently so valuable that people are stealing it. “Vanilla theft is indeed on the increase,” reports Gepa spokesperson Brigitte Frommeyer. That's another reason for the declining quality. The farmers are not only harvesting their pods too early because they can find buyers for them at this stage but also because they are afraid their pods will be stolen. She says that ultimately there's no guarantee for either retailers or end customers that it's not stolen goods on the shelves, because the thieves carefully mix stolen with legally acquired pods and then pass them on.

A vanilla farmer checking the ripeness of the pods. Report on cropping on the Comoros (Photo © Rapunzel)

No relief in sight

In the short term, there's no relief in sight for the world vanilla market. This also puts small businesses that work with vanilla under pressure. Vanilla soap, vanilla doughnuts and lots more are now hardly profitable. The owner of an ice cream parlour, who uses only natural ingredients, explains that he is desperately looking for replacement products. He says he has tried tonka beans and the result is good, but it's just not vanilla ice cream. Since he can't banish the old favourite from his freezer, he has to subsidize vanilla ice cream with other varieties until the price of vanilla falls.

Countries like India and Indonesia could in fact grow more vanilla in order to meet the demand. However, its a long process – it takes three to four years from first planting to first harvest. That's how long the farmers on Madagascar will have to stay overnight on their fields at harvest time to keep thieves at bay.