Vanilla-flavoured dependency

Vanilla is a plant of the orchid family that originated in Mexico.  French colonialists transplanted it in their Indian Ocean territories, and now Madagascar produces 80% of world natural vanilla output.

As it is viewed as a commodity (one batch pretty much the same as any other), buyers in the perfume and food industry simply buy from intermediaries at the cheapest available price.  The producers are small-scale farmers making a precarious living in a country that is among the ten poorest in the world.

In the last five years, a few things have brought this dependency on Madagascan vanilla into the headlines, with some American ice-cream chains now delisting vanilla flavour.  Dependency means companies are susceptible to sudden changes in price and availability.

A few bad harvests in Madagascar have restricted supply, which has meant higher profits for those who can get hold of vanilla (they still pay the farmers the same amount per kilo).  That has led to organised crime getting involved in stealing crops, and also in using vanilla purchases to launder money from the illegal rosewood trade.  Consequently, a kilo of vanilla which cost $20 five years ago, now costs companies like Mars and Danone around $600, which is more than the price of silver.

In an attempt to understand and control this dependency, the likes of Mars are looking to miss out the intermediaries and to get involved with, and to help, individual growers in order to secure supply at a reasonable price.

Story source:  FT Online

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