In the humid Sava region of northern Madagascar, where vanilla vines grow in the shaded canopy of the jungle, villagers guard their crop as though it were a precious metal. Well they might. Strong demand for natural vanilla, speculation, bad harvests and money laundering have driven prices as high as silver.
Farmers often awake to find their vines stripped bare, carried off in the night by gangs of thieves filling orders for buyers in the far-off capital of Antananarivo, who in turn supply the markets of western Europe, the US and Asia. In some parts of Sava, say non-governmental organisations working in the region, vigilante groups have sprung up to mete out summary justice to the vanilla snatchers.
Madagascar, which supplies 80 per cent of the world’s natural vanilla, is in the grip of a vanilla boom. “People are saying, ‘I don’t care about growing food to feed myself. I only want to grow vanilla’,” says Eugenia Lopez, an agricultural expert with Swiss development agency Helvetas. Girls are dropping out of school to marry “vanilla barons”, and sales of televisions, alcohol and other luxuries are high. “People are buying cars and motorbikes that they won’t even be able to fill with petrol when the price of vanilla crashes,” says Ms Lopez.
Though some farmers have done well from the vanilla rush, many more have not. The lion’s share of profits go to the buyers, intermediaries and exporters who purchase vanilla, process it and sell it to the world’s makers of chocolate, perfume, ice cream and flavouring. The price hike has caused ripples as far away as London and New York where some ice-cream parlours have taken vanilla off their menus.
While the likes of Coca-Cola, Unilever, the British-Dutch consumer goods group, or Danone, the French food company, are forced to pay inflated prices, farmers receive only 5 to 10 per cent of the value of their crop, according to industry observers.Worse, they say, if farmers switch to lucrative vanilla and abandon food crops such as rice and manioc, they could be left in desperate straits when the vanilla market crashes, as it inevitably will. Vanilla has been through violent booms and busts before. Only five years ago, it was trading at $20 a kilogramme against some $515 now, down from a recent peak of $600 and compared to a silver price of $528/kg.
“You know the Dutch disease?,” says Patrick Imam, the IMF representative to Madagascar, referring to the curse that commodities sometimes bring. “Well, I call this the vanilla disease.”
The inability to convert natural wealth into a decent standard of living is not only of concern to Madagascar and other, mostly poor, commodity-producing countries in Africa, Asia and Latin America. Increasingly, it is a problem for the buyers of commodities too. Consumers are more concerned about where their food comes from and the environmental and social impact of their buying preferences.
Even if countries such as Madagascar — with their chronic malnutrition, their vanilla thieves and their lack of development — seem a long way away, NGOs are piling pressure on multinationals to come clean about the origins of their ingredients and the conditions of the people who produce them.
“I think what everybody’s discovering is that the supply chain is broken,” says Victoria Mars, a fourth-generation member of the family that owns Mars, which purchases about 0.5 per cent of the world’s vanilla, mainly for chocolate brands such as Snickers and Twix. “We’ve got to take some responsibility,” she says. “Vanilla is a small piece, but we’ve got to start somewhere.”
Barry Parkin, head of procurement and sustainability at Mars, says companies must change the way they buy commodities. In fact, he goes so far as to declare the age of commodities dead.
“Historically, commodities have been something that’s uniform, that people bought at arm’s length, that you didn’t know where it came from,” he says. When he was buying cocoa for Mars 15 years ago, the specification was “west African flavour”. Mars did not know whether it came from, Ghana, Nigeria, Cameroon or Ivory Coast — nor anything about the conditions for production. “We bought it from the cheapest supplier that week, that month.”
That sort of relationship will no longer wash, says Mr Parkin, who credits NGOs with exposing the underbelly of supply chains that too often see luxury goods at one end and malnutrition, deforestation and child labour at the other.
“This train is running and running fast,” he says. “The big commodity houses — the Cargills, the Archer Daniels Midlands, the Bunges, the 200-year-old companies that have been built on moving commodities around the world at the most efficient price — I don’t think they see this coming.”
Emmanuel Faber, chairman and chief executive of Danone, another big purchaser of vanilla, expresses similar views. He estimates that Danone sources its ingredients from 70 to 100 countries. Like Ms Mars, Mr Faber recently travelled to Madagascar for the first time to find out why it is so expensive and what can be done to secure supplies and improve farmers’ lives.
“For generations, consumers in the western world have entrusted large brands to supply delicious, affordable food,” Mr Faber says. “The next generation came educated with doubts about the system, doubts about climate change, doubts about inequality.”
That means, he says, that multinationals like Danone have to make credible efforts to find out what is going on in their supply chains and to tackle issues when they identify them. “Food and water is not just a consumer good,” he says. “That’s a huge ideological simplification we maintained for 50 years.”
Both Ms Mars and Mr Faber admitted to arriving in Madagascar knowing almost nothing about how vanilla was produced or under what conditions. Even Mars’ top buyer was in the dark. “I could talk to you for weeks about cocoa,” says Amanda Davies, vice-president for commercial-global strategic sourcing. “I could talk to you for five minutes about vanilla.”
A type of orchid, vanilla was first cultivated in Mexico, but transferred to the Indian Ocean islands of Réunion and Mauritius by French colonialists in the early 19th century. Hopes of growing the crop there were stymied by the absence of bees to pollinate vanilla until a slave, Edmond Albius, worked out how to pollinate the flower by hand.
The plants were taken to Madagascar. Not only is its climate perfect, but it is also one of the few places on earth poor enough to make the laborious process of hand pollination worthwhile.
When prices rose in the early 2000s, Indian farmers began to plant vanilla, says Dominique Roques, a senior executive at Firmenich, a privately owned Swiss fragrance and flavour house that buys about 10 per cent of the world’s vanilla. “Then the prices collapsed and when they went below $40, India simply said: ‘No, we’re not interested in producing any more.’ Madagascar’s farmers can’t do that because, if they do that, they starve.”
Uganda, Indonesia, Papua New Guinea and the Seychelles produce small quantities of vanilla, leaving most of the market to Madagascar.
Mr Roques says Madagascar’s near-monopoly and the limited number of serious buyers and sellers — he estimates a few dozen in total — is one reason for the wild price swings. Three bad harvests in the four years to 2014 drastically reduced the supply. When companies’ stocks ran out, buyers committed to natural vanilla were forced to pay exorbitant prices.
Crime has compounded the problem. Madagascar has a flourishing illicit trade in rosewood to China and south-east Asia. Those who sell it are stuck with huge quantities of ariary, the local currency. A favoured way of getting rid of it, say experts, is to buy vanilla, which they can sell for dollars.
“Dirty money is one side of the problem,” says Mr Roques. He also blames the entry of hundreds of intermediaries simply out to make money in the boom times. “And because of the value of the beans, robbers step in.”
Thieves, who operate at night using lanterns, cut down unripe vines or carry away the entire plant. These produce far less vanilla, or no vanilla at all, meaning that buyers are paying record prices for some of the lowest-quality vanilla in years. “That’s the dramatic situation in Madagascar today,” says Mr Roques. “Masses of incredibly expensive, incredibly low-quality material.”
In the village of Andrangazaha, in a district south of the traditional vanilla-growing Sava region, farmers are working with companies to rationalise the supply chain. The Livelihoods Fund for Family Farming, established by Danone, Mars, Firmenich and French utilities company Veolia, aims to raise yields and help farmers cure their own vanilla, which can increase incomes by up to four times, according to Bernard Giraud, Livelihood’s president. It also encourages farmers to plant food crops.
“One of the objectives is to get the middlemen out,” says Silvano Tsialazo, a project manager in Andrangazaha. “The goal is to shorten the distance between the producer and the main customers.”
To ward off thieves, villagers organise night-time patrols and stamp each individual vanilla bean still hanging on the vine. Authorities are handing out stiffer sentences. In the past, links to well-connected buyers meant they could be free in three days, but now sentences start at three years. Ten thieves were caught in the village during the last season alone, and vanilla theft fell from an estimated 80 per cent to just 10 per cent.
In spite of Madagascar’s lushness, hunger is never far away for many of the island’s 25m people. Nearly one in two children are stunted, meaning they are likely to grow up either physically or mentally disadvantaged. Years of political instability and the virtual absence of the state (or roads) beyond the capital mean little in the way of development, services or support reaches most people. The world’s fourth-largest island, Madagascar is poorer than Haiti, according to World Bank data, with an annual per capita income of just $400 at market prices.
Lydia Soa, a 46-year-old mother of five, planted vanilla over the objection of her husband, a fisherman. Now they are reaping the benefits. “He doesn’t have anything to say about it,” she says with a swagger. “It’s making money, so he’s happy.”
In the tiny plot next to her wooden home — replete with a solar panel and a boombox — her neatly planted vanilla vines are worth around $8,000, a small fortune in Madagascar. “There’s dollar bills hanging on those trees,” says one onlooker. Ms Soa has saved enough money to send her two eldest children to university in Antananarivo, 12 hours by road in the dry season.
In Sahabevava, where Livelihoods is also operating and where Ms Soa lives, the vanilla entrepreneur is talking to visitors from some of the world’s largest food companies. She is probably unaware that one of the middle-aged women she is addressing in such confident tones inherited an 8 per cent stake in Mars, a company whose annual sales of $35bn is more than three times Madagascar’s official gross domestic product.
“This is the first time I’ve been face to face with the buyers,” says Ms Soa, adding that she has heard westerners use vanilla in their food.Ms Soa is anxious that Livelihoods sticks to its 10-year commitment to buy vanilla. She is encouraging other women in the village to grow the crop, but says it is a big commitment to plant vines that will not bear fruit — or profit — for two to three years. By that time, no one has a clue what the price will be, since vanilla has no futures market. Other NGOs, says Ms Soa, have come and gone and let the village down.
Mr Parkin at Mars says that the tight relationship with villages like Sahabevava is the antithesis of the anonymous logic that has prevailed in commodities.
The companies involved concede that this type of project — which they are replicating with mint, coconuts and cocoa — is just a start. Mars works with perhaps 1m smallholder farmers around the world, a fraction of whom are covered by schemes where they have such a close relationship.
Until companies make more meaningful efforts to find out what lies at the end of their supply chains, most agree that schemes like those in Madagascar will remain the exception. Ingredients for the little luxuries of life in the west, such as chocolate, vanilla ice-cream and perfume, will continue to be supplied by farmers struggling to feed themselves or to send their children to school.
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