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McCormick’s quest to make your vanilla shake cheaper

Reuters

Fresh vanilla pods are seen at a plantation in Ambavala, near Andapa, Madagascar, in July 2018.

ReutersCHICAGO/ANTANANARIVO (Reuters) — A kilogram of vanilla beans costs more than a kilogram of silver.

Cultivated painstakingly over years from an orchid plant, vanilla is the second-most expensive spice in the world, after saffron.

In less than five years, the wholesale price has risen nearly 500 percent, partly because of growing global demand for healthy, natural ingredients. But supply is an issue too: Cyclones, drought and crop theft have hit Madagascar in recent years, slashing into the tender crop’s quality and quantity. The African island nation produces about 80 percent of the world’s vanilla.

For McCormick & Co., the world’s largest spice company, the scarcity of vanilla has become too big a risk to ignore, spurring it to begin cultivating an alternative source on the north coast of Papua, Indonesia. McCormick, which sells vanilla and its extract to retailers, restaurants and packaged food makers, said it has been passing the higher costs on to buyers.

The price of black whole-bean Madagascar vanilla, the benchmark product, costs $520 per kilogram. While this isn’t quite the spice’s record-high of $635 — reached after a ruinous cyclone in 2017 — it is still nearly six times the price of $87.50 in early 2015.

Back-to-back typhoons in 2017 and 2018 “definitely put input pressure on costs,” Nestle SA U.S. CEO Steve Presley recently told Reuters.

The world’s No.1 food company raised prices for U.S. ice cream products in 2017, partly due to mounting vanilla prices, he said. The Swiss food giant makes Haagen-Dazs, Edy’s and Skinny Cow ice creams, which tout natural vanilla flavoring or beans on their labels.

General Mills, which sells Haagen-Dazs outside the United States and in the brand’s international ice cream parlors, said higher vanilla costs were forcing prices upward.

Now, Donald Pratt, managing director of McCormick’s global procurement arm, said the company is looking to Indonesia as a possible solution to the industry’s supply problem.

But pulling this off may be an uphill task.

Indonesia produces only about 100 tons of whole vanilla beans a year, a far cry from Madagascar’s output of about 2,000 tons, Pratt said. And some others who have tried to cultivate a secondary source for vanilla have not been successful. Unilever’s Ben & Jerry’s, for instance, “invested heavily” in a similar project that backfired in Uganda.

Vanilla — sometimes called green gold — is so coveted that thieves will kill for it.

“This is the dark side of vanilla. You don’t realize it because it’s such a sweet thing,” said Cheryl Pinto of Ben & Jerry’s, which uses vanilla in most of its ice creams, as well as in other items such as cookie-dough chunks. Pinto said she is in charge of managing the company’s supply chain with a “social mission” in mind.

To protect their crop in Uganda, “farmers were sleeping in the fields and there were murders and beatings,” she said. “It was awful.”

This month, when setting harvest dates, the Ugandan government called out “cases of theft and loss of lives” spurred by higher prices. The violence goes both ways: Last year, Reuters reported Malagasy growers defended their fields by beating suspected thieves to death.Speech

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