You may have seen the headlines. “Vanilla shortage may balloon ice cream prices,” as in USA Today. You may also have read the bad puns, like, “If you take a licking on the price of an ice cream cone this summer, the cause might be due to a spike in the cost of vanilla beans, which are in short supply.”
Yes, there is a vanilla shortage, blamed in part on a surge in demand for natural flavors, and on a terrible crop in Madagascar, the main producer of vanilla beans. You might remember that in 2015, a host of big food brands, led by Nestlé, vowed to use only natural flavors in products marketed in the U.S.—just as a shortage of natural vanilla was emerging. One source said that prices have risen from $80 per kilo to more than $250 as a result. But it gets worse–the quality is also poorer as many producers harvested what they had early to meet demand.
Prior to the 2015 move toward natural flavors, about 85 percent of the vanilla flavor in food came from a chemical version of vanilla called vanillin. Vanillin was first synthesized variously from pine bark, clove oil, rice bran, and lignin. Now most of it is synthesized from the petrochemical precursor to these sources, guaiacol. Ew!
Dairy products such as ice cream and yogurt have relied on natural vanilla for many years, McBride points out. In the U.S., Food & Drug Administration rules state that vanilla ice cream must get its flavor from natural vanilla. If the flavor comes partially or fully from another source, the company must stamp “vanilla flavored” or “artificial vanilla” on the front of the package, a likely turnoff to consumers.
Other foods don’t get the same kind of scrutiny. Go figure. Makers of candies, cookies, cakes, and cereals have been free to use whatever flavoring agents they please without labeling requirements. Thank ‘Nilla, for example (no vanilla in those wafers).
The vanilla flavor (natural or synthetic) is also an important ingredient in other flavors, including chocolate, strawberry, caramel, coconut and more. The addition of vanilla flavoring in products using these ingredients adds both a creamier flavor and an offset to a naturally occurring bitterness or acidity. When it is added to other flavors such as chocolates, vanilla becomes part of a proprietary recipe, and replacing vanillin with vanilla is not easy because it’s not going to replicate the proprietary flavor without considerable modification.
Another complicating factor is that natural vanilla grown in different geographical locations has different taste profiles, not unlike wine. In addition to Madagascar, vanilla is produced in Mexico, Asia, and other regions. Each one has a different taste and intensity. Madagascar vanilla, for example, is referred to as Bourbon vanilla, for its rich oaky taste and sweet aroma.
Our take is that we can expect prices to remain at record highs for the foreseeable future, with some easing, as the 2016 crop is cured, dried, and ready to ship this December. Long term, (meaning 2 or 3 years out) if the pattern holds true, high prices will bring on more growers resulting in an oversupply and steeply falling prices; a throwback to how markets behaved in olden days.