Price, price, baby! Vanilla shortage leads to soaring costs
Bakeries, ice cream makers feel the squeeze as global supply shrinks while demand increases
Prepare to shell out a little more for the sweet treats of spring and summer as a global surge in the price of vanilla makes itself felt at some small-batch ice cream shops and neighbourhood bakeries.
The cost of the foodie staple has been on the rise for years, but is now starting to be felt on retail shelves and at momand-pop eateries that pride themselves on natural ingredients, say observers.
That includes Toronto cupcake master Verge Manuel, who says the hike is exacerbating various financial pressures on his two gourmet shops, called Dlish.
“There are certain forces that we have no control over, which is the pricing of certain ingredients that we have to obviously pass along at some point because you can’t absorb it anymore,” said Manuel, whose brand revolves around the use of real Madagascar vanilla.
“One of the rising costs is vanilla, absolutely.”
When Dlish started seven years ago, Manuel said, the price of vanilla generally increased 10 per cent a year. But two years ago it doubled for him, and last year it went up five-fold.
Vanilla prices are the highest they’ve ever been, says David van der Walde, director of Montreal-based vanilla importing company Aust & Hachmann Canada.
He said the wholesale price now runs as high as $850 per kilogram for premium beans — a 10 per cent increase from last year, which was 30 per cent more than the year before that.
Five years ago, you could get vanilla for as little as $20 (U.S.) per kilogram, van der Walde said, calling that price “excruciatingly low.”
It rose quickly as consumers began demanding natural ingredients in everything from chocolates to cakes to yogurt.
Big food companies responded to the new demand, with Hershey’s among the power players that announced a switch to real vanilla in 2015 for their chocolate bars.
Meanwhile, increased demand coincided with shrinking supplies, van der Walde said, noting that less-established plantations outside of Madagascar gave up on the labour-intensive crop because prices were low.
“And then the price starts to go up again,” he said.
Things got only worse in March 2017 when a cyclone hit Madagascar, the world’s leading producer of vanilla, destroying a good portion of their output for 2018.
Ever since then, ice cream maker Cyril Chalykoff said, he can barely secure enough of the richly flavoured beans to keep production going.
“We’re getting to the point now where it’s getting very, very, short supply,” said Chalykoff, president of London Ice Cream based in London, Ont. “We’re just scrambling. We’re scrambling.”
Vanilla is pretty much synonymous with ice cream, he added, scoffing at the possibility of dropping the flavour from his menu. “That’s like saying to a Canadian, ‘You can’t have coffee anymore.’ ”
For now, he’s absorbing the cost, but with margins shrinking, he admits he’s weighed the pros and cons of charging more.
“It’s unfortunate because a lot of people don’t really recognize the difference between one va- nilla to the next, and you really get lumped in with (other) vanilla ice cream,” he said.
“If we go up in our pricing a little bit, then some customers won’t appreciate that, won’t understand it.”
Even the big companies feel the impact, such as Nestlé Canada and its naturally flavoured Real Dairy brand.
Catherine O’Brien, senior vice-president of corporate affairs, said in an emailed statement there are no plans to raise ice cream prices, but they are “continually managing ingredi- ent and commodity costs across all of our product portfolios.”
Smaller players are undoubtedly struggling, van der Walde said.
“We sell vanilla beans directly to small ice cream shops here in Montreal who use them and they’re freaking out over the prices,” he said.
Van der Walde said supply is actually on the upswing, and that prices are plateauing. But not all suppliers stock up if they know clients will balk at the price.