CONTENTS | ANB-BIA HOMEPAGE | WEEKLY NEWS
by Léa Ratsiazo, Madagascar, March 1998
THEME = ECONOMY
Customs' duties removed and a free market established.
All well and good, but will Madagascar's vanilla succeed this time
in recovering its place as an international market leader?
Once the benchmark for the world,
this orchid from the popularly called "Red Island",
is trying to rebuild its reputation
Vanilla is a pod produced by one of the 17,000 species of orchids in the world. Originating in south-east Mexico, and imported to the islands of the Indian Ocean, the Antilles and Oceania, it has been grown commercially since the 1840s. Organised production of the pods began particularly in Madagascar, in Comoros and Réunion, where the type of vanilla known as "bourbon" is considered to be the best in the world.
From 1890 onwards, the plant spread throughout Madagascar, and exports rose to 300 tonnes in 1924. Even then, Madagascar was already known as the main world exporter, and the town of Antalaha, where the research centre for vanilla is located, was called the "Mecca of vanilla" - the world capital of vanilla. At its height, in the 1980s, Madagascar was producing about 1200 tonnes per year, with exports of between 750 tonnes and 800 tonnes.
For a long time, Madagascar dominated a fairly stable world market, before finally handing over to Indonesia. Madagascar accounted for up to 70% of world requirements in the 1970s, tumbling to 30% in the 1990s, for a variety of reasons.
During the last 20 years, because of a policy of increasing export prices, and excessive taxation, Madagascar's share in the international vanilla market has continued to fall. Everyone agrees that this sector "is suffering". Its administration is characterised by a loss of competitiveness in external markets. Those responsible for Madagascar's restructuring, note a considerable impoverishment, a downward spiral in storage-stocking policy, as well as demoralisation and massive discontent on the part of all the workforce. Vanilla is nonetheless, a strategic production sector for the State. Its export constitutes 10% of the country's budget. Therefore, the loss of its share in the export market, entails serious consequences at all levels. Vanilla's catastrophic fall in its particular sector is explained initially, by the prohibitive cost of the "flavouring" - up to US $74 a kilogramme in 1991. That year, taxes increased by 86%. They then fell again, and since last year, following reforms and liberalisation of this sector of production, vanilla hasn't attracted any special taxation.
Nevertheless, real recovery is still to come. This sector also suffers from alarming smuggling activities. What happens? In order to escape taxes, those involved in smuggling export the product to the islands in the Indian Ocean, especially Comoros and Réunion, which then announces that the vanilla coming from Madagascar, is part of their own quota.
The lack of control has also had the serious effect of mixing good quality with poor quality pods, thus severely tarnishing the reputation of Malagasy bourbon vanilla. Madagascar's vanilla has a vanillin concentrate of nearly 6% compared to only 1% for Indonesian vanilla. For whatever reason, the excessive price charged by Madagascar has encouraged a demand for lower-priced poor-quality vanilla.
Indonesia is Madagascar's bête noire in the international vanilla competition which began in the 1980s. Indonesian exports of 60 tonnes on average during the 1960s, 180 tonnes in the 1980s, have now risen to 650 tonnes in the last few years. During the 1960's, Indonesia's production of vanilla was just one-seventh of Madagascar's; it rose to one-fifth in the 1980s; and went even higher at the start of the 1990s. Indonesia's vanilla production has increased rapidly in less than 10 years, and is now the leading world producer of vanilla. Cultivated areas have expanded from 9,800 hectares in 1987 to 16,600 hectares in 1990.
However, there are other countries which have been developing a fearsomely aggressive commercial strategy, such as China and South Africa.
On the other hand, vanilla, which is the most widely used spice in the world, is also the most subject to competition from cheap synthetic products, such as synthetic vanillin (90% of the American flavouring market), and other "natural flavours". Despite regulations which currently restrict replacement by synthetic products, biotechnology is also threatening all or part of the world vanilla market - assuming that legislation concerning the use of the word "vanilla" develops and consumers are prepared to accept the new products proposed.
Madagascar's long predominance in this area can be explained by many factors, such as favourable agri-ecological conditions as regards vanilla, the quality of vanilla produced (high vanillin content, which is stable and consistent, etc.), application of a strict quality control system, and relatively low production costs, compared to those of other producing countries.
In Madagascar in 1991, production costs were estimated at US $13.08 per kilogramme of vanilla at wholesale prices, compared to US $43.64 in Comoros, and between US $20.60 and US $34.40 in Indonesia.
The producers are the forgotten ones in the sector. They receive less than 8% of the cost of the vanilla exported, even though it is they who produce it. The peasant farmers of the north- east of the island, where vanilla is produced, are actually among the poorest in the country, despite paradoxically living in the area with the greatest wealth of natural resources. About 22,000 to 25,000 hectares are occupied by vanilla plants.
Conversely, since 1995, under pressure from the World Bank, the State Bank and the Rural Development Bank (BTM) have ended subsidies for the vanilla-producing areas. The result of this is that the Malagasy vanilla industry is dying. Production prices are so low that the purchasing power of the vanilla-growers is considerably reduced, and the peasant in the north-east, who can no longer afford to buy rice, is forced to plant it, in order to eat, thus damaging his vanilla production.
The vanilla producers are an ageing population, and young people have neither the desire nor the capability of taking over the land and starting out in vanilla-growing. The poor income from their elders, and the neglected state of the farms, combine to drive them to seek another way of life.
The Malagasy government has therefore set up a Project For The Professional Restructuring of Madagascar's Vanilla Sector. This project is financed by the European Union, with a package of 3,188,500 Ecus spread over a four-year period.
At a grassroots level, problems connected with vanilla production concern more than 60,000 families who still earn their main income from this form of agriculture. At this level, taking action in the technical aspects of producing vanilla, will no doubt improve the overall balance of operations. The main aim of the project consists in improving yield in a limited area, thus allowing the peasants to diversify their crops, in particular food crops.
The professionals involved, estimate that there are real prospects for development. The market does have potential for expansion, if promotional effort is put into consumer and industrial countries, especially Japan, Canada, Scandinavia, Great Britain, Italy, Eastern Europe and the Gulf States. In these countries, demand for natural products, together with favourable legislation, must give rise to increased demand. The proportion held by natural vanilla in the world market for vanillin has to be strengthened: at the moment it is only 0.3%.
For example, for some time in the USA, there's been a heavy promotional campaign, advancing vanilla as "the" fashionable "perfume". According to experts, the effects of this marketing campaign will last at least ten years, encouraging a high demand from agro-industrial companies in many sectors - perfume and cologne, cosmetics and soap, lipsticks, foam baths, industrial deodorants and ready-made foods (including natural flavours): coffee, ice cream, cakes, chocolate, desserts and other milk-based products. There are also specific areas to address based on the organoleptic, dietary and medicinal qualities of natural vanilla, together with information campaigns on recipes and means of using the pod in cooking and baking, which should produce a significant growth in the market for "edible vanilla" (pod sold in retail outlets). This market is currently only an infinitesimal part of the world market (2% in USA, less than 20% in France).
Current annual consumption of vanilla on world markets, is estimated at about 2,000 tonnes. The leading importing countries are the USA (60%), France and Germany (each 15%), Japan and Canada (each 2%). Some of these countries only consume a part of the pods they import, re-exporting the remainder to other consumer countries, as is the case with Germany, which re-exports 60% to 70% of its imports.
Vanilla is a product which is in fact something of a mystery, but which is arousing industry's interest.
END
CONTENTS | ANB-BIA HOMEPAGE | WEEKLY NEWS
PeaceLink 1998 - Reproduction authorised, with usual acknowledgement