Cake crisis as vanilla supply dries up
Prices surge as cyclone-hit Madagascar unable to satisfy demand for its beans
Michelle Chow’s baking supply store Vanilla Food Company is out of Madagascar Bourbon vanilla beans and she doesn’t know when she’ll get new stock.
The world’s supplier of what Chow calls the “Mercedes of all beans” is suffering a shortage.
High demand combined with natural disaster created shortages devastating the production process. Growers and pickers of vanilla beans in the east African island country were left scrambling to get crops back on track. The shortages in Madagascar have far reaching consequences for buyers and consumers, including those here in Toronto whose businesses rely on the popular flavour.
“There are other wonderful types — Tahitian, Mexican, Indian — but Madagascar is the most widely used and sold,” says Chow, whose Markham-based company has been out of Madagascar vanilla bean stock for six months. Chocolate instead keeps the business afloat during the vanilla crisis.
Madagascar’s global share of the vanilla market is nearly 80 per cent, according to a spring report by U.S. supplier Nielsen-Massey. But in 2016, demand hit such a high as large companies moved from synthetic to natural flavouring that vanilla experts predicted shortages and price surges. Supply could not keep up with demand.
Then cyclone Enawo hit in March — the strongest to hit the country in 13 years — and the crisis got worse as some 30 per cent of the crops were damaged, according to vanilla producers on the island, Reuters reported in March. Prices surged for companies around the world. One pound of vanilla beans sold for $89 nine months ago, Chow says. Today, the same amount could cost more than six times that — if you can get it. She has noticed that people have switched to vanilla extract or vanilla paste. “But even that has skyrocketed . . . You need vanilla beans to make extract and paste,” she says.
The next crop of vanilla beans is expected to be ready for harvest in spring of 2018, Chow says. Many vanilla farmers had to start their crops from scratch and while other countries have tried to capitalize on the high prices and enter the vanilla trade, it can take years before they produce market-ready crops, says David van der Walde, director of Aust & Hachmann Canada, a Quebec-based vanilla importer.
“When prices rise, areas like Indonesia, Uganda, Papua New Guinea, get interested again,” he says. “They start planting, but it takes three or four years for a vanilla plantation to come online, so you always have this lag.”
It’s in that lag of growth where the market can get “out of control,” he says.
The current shortage was confounded by the March cyclone and increased demands from big buyers moving from synthetic vanillin to natural vanilla products.
“Demand for natural vanilla has increased significantly as companies like Unilever and Nestlé decided to
“We want to use the highest quality vanilla, because we want to make sure our products taste the best.”
LISA SANGUEDOLCE OWNER OF LE DOLCI BAKE SHOP
put more natural products into their formulations,” van der Walde says.
In 2015, a slew of big companies — including Nestlé, Hershey, Kraft and General Mills — vowed to remove synthetic flavours from their products, including artificial vanillin, the most common vanilla flavouring agent.
This increased demand led to higher prices for vanilla and its byproducts, van der Walde says. For large companies like those, stocking up on vanilla in case of a shortage is doable. “Smaller users, it becomes very difficult to stock up at these prices,” he says.
Toronto’s Lisa Sanguedolce, owner of Le Dolci Bake Shop on Dundas St. W., is one of those smaller users. Still, “we need vanilla, 365 days a year,” Sanguedolce says. She could opt for cheaper, alcohol-based vanilla flavouring, but chooses to use pure Madagascar vanilla bean paste. “We want to use the highest quality vanilla, because we want to make sure our products taste the best,” she says.
She buys her vanilla from Toronto supplier Baker’s Pantry in a case of a dozen bottles at $166 per 944 ml bottle.
“You have to increase your prices and kind of roll with it,” she says, though she notes she has not raised her prices significantly, she will raise them next year by 25 cents per cupcake ($2.75 to $3), but says this is also because of labour and rent increases.
It’s not the first time vanilla prices have jumped. In 2000, tropical cyclone Hudah damaged at least half of Madagascar’s vanilla fields. Prices climbed to $500 per kilogram in 2003 before dropping to a normal $20 per kilogram range.
Last year due to high demand, prices had jumped back to around $500 per kilogram, van Der Walde says. He’s confident lower prices are on their way, as vanilla production improves in Madagascar.
“I believe we’re at the end of the current high cycle and by 2018 we’ll see a much-needed price relief,” he says. At the Markham Vanilla Food Company, Chow is still unsure of when she’ll be able to restock her supply of vanilla beans.
“Hopefully (Madagascar farmers) have a great year, as long as the continuous bad weather that’s happening around the world stops,” she says. “People still want the real vanilla.”