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‘Spice spice baby’: Possible price hikes loom for premium vanilla ice cream?

By Ben Bouckley , 03-Apr-2012

Black, food-grade vanilla tends only to be used to flavour premium ice cream (Picture Copyright: Allie Bishop Pasquier)
Black, food-grade vanilla tends only to be used to flavour premium ice cream (Picture Copyright: Allie Bishop Pasquier)

Steep hikes in world prices for black vanilla could mean higher production costs for premium ice cream makers, according to commodity analyst Mintec, which is advising ice cream producers to book their contracts for the spice now.

Business development director Nick Peksa told DairyReporter.com that – following poor harvests this year in both Mexico (a 90% lower harvest is expected) and quality issues in India – reliance had grown on stocks from remaining key source country and main world producer Madagascar.

Wholesale prices have jumped from $25 per kg to around $30 per kg in two months, in a jump that will have a wider impact on food and beverage manufacturers who use the spice beyond ice cream, although prices are still way off record highs of $450-500 per kg in 2003 - the result of a cyclone that hit Madagascar in 2000.

Expensive spice

Peksa was quoted by The Telegraph as saying that – upon the basis of the current rise in wholesale prices for food grade vanilla, the most expensive ingredient in  ice cream flavoured with the spice, its costs could rise by around 10%.

But he told this publication: “Overall, the media have blown up this story, because natural vanilla is used more in Haagan Daaz-style premium ice cream. If it’s just going to be vanilla flavour, then chances are it’s going to be the vanillin which is cheap and readily available.”

Vanillin is a vanilla replacer derived from the wood polymer lignin, which is generally used in instead of the spice in cheaper products, and Peksa said it was currently trading at around $13 per kg.

In terms of cost ratio, vanilla represented a very small proportion of the total cost of ice cream, Peksa added. “It’s one of these trace flavours, so to speak, so it could be 0.01% or something like that, as it’s such a strong flavour.”

Flat market moves

Zelica Carr, CEO of UK trade body the Ice Cream Alliance told DairyReporter.com that it was too soon to speculate on vanilla ice cream price hikes, and that essence or flavouring could always be used instead.

She said: “For your normal product that you might get in the supermarket in the basic range it will never be a problem. But for premium products – if our members couldn’t use vanilla pods then they’d have to use the very best of what was available.”

Carr added: “It’s not a major problem. There are supplies in Madagascar, but obviously it could become an issue if people hoard it and drive up the price of the product.

“But our members are used to product prices increasing rapidly – take sugar, emulsifiers and cocoa last year when there was the war in the Ivory Coast. Our members will try to absorb as much extra cost as possible, because they want to ensure that ice cream is an affordable treat.”

Peksa also insisted there was no vanilla supply crisis as yet: “The price has been flat for five or six years, and because of that people have perhaps changed for cash crops such as cloves. But shipments are going out of Madagascar, while Mexico (a very specialist market) is down, and there are quality issues in India and Indonesia.

“So overall it’s a tightening marketplace, and recently we’ve seen little upturns in price with the chance that prices could increase further if people start sitting on crops. We’re at a potential turning point in the market – so if I were an ice cream manufacturer I’d be booking my contract right now.”

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