Vanilla extract becomes more expensive than silver; synthetic flavour from petroleum, coal tar is spurned in favor of non-synthetic options

Crop uncertainty drives vanilla price back to record level. Emiko Terazono, The Financial Times, March 25, 2018
Foodmakers turn to alternatives as flavour extract becomes more expensive than silverhttps://www.ft.com/content/1c810c2a-286f-11e8-b27e-cc62a39d57a0

Ice cream and cake makers hoping for cheaper vanilla will be disappointed as uncertainty about this year’s crop in the world’s top grower Madagascar has driven the price of the spice back to record levels.

Vanilla prices soared to its record $600 a kilogramme last year after a cyclone hit the tropical island off the south-east coast of Africa, sending buyers scrambling to secure supplies of the flavouring extract.

Prices eased off below $550/kg at the end of last year on hopes of a good crop in 2018, but are now back at $600 amid uncertainty over crop levels.

The flowering period of the vanilla orchid, which produces vanilla beans, has ended and the pods are now growing.

“We won’t know the production [levels] until June,” said Mélanie Legris at Eurovanille, the French trading company.

Vanilla is the second most expensive spice after saffron and at current levels is more expensive than silver, which is trading just above $530/kg. Madagascar supplies 75 to 80 per cent of the world vanilla bean market, and other producers including Indonesia and India do not grow enough to make up for sudden fluctuations in Madagascan vanilla pod production.

The squeeze on vanilla beans has also pushed up the price of by-products of the beans.

The price of “spent” vanilla specks — ground vanilla made from used beans that are then dried, ground and sterilised — has jumped from about $40 a kilogramme to $150, said traders.

In most cases, the spent specks are used as a “visual enhancement” said Naushad Lalani at Sentrex Ingredients, a US maker of essences and food flavouring ingredients.

Using spent beans allows foodmakers to list vanilla beans as an ingredient and put a picture of a vanilla pod or flower on the packaging, although the actual flavour may come from a non-vanilla bean source.

Some artisanal ice cream makers were forced to stop producing vanilla ice cream last year as they could not get hold of affordable vanilla bean supplies, while others raised prices or switched to vanilla flavouring made from other sources.

Vanilla is one of the world’s most popular flavours, but only about 1 per cent of the extracts used in food and cosmetics come from real pods. Vanillin, the flavour molecule found in vanilla beans, is also extracted from petroleum, coal tar and wood as well as natural food sources such as rice bran and clove oil.

Demand for artificial vanilla flavouring is rising. There has been “a positive shift in demand for our bio-based sustainable vanillin product”, said Tone Horvei Bredal at Borregaard, the Norwegian group that makes vanillin from wood.

Vanilla pod prices were on the rise before the cyclone hit Madagascar, as leading foodmakers such as Unilever and Nestlé pledged to use natural ingredients in their products, spurning synthetic flavourings.

But the rising price of vanilla beans is forcing users away to natural alternatives. Demand destruction is a concern, Mr Lalani said. “People have migrated to natural alternatives. Will they ever come back to pure vanilla?”