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MARKET OVERVIEW

1.1 Definition and scope of the study

Vanilla designates the fruit of the orchid Vanilla planifolia commonly called vanilla, which is found in the undergrowth of tropical rainforests. It comes in the form of a pod that has an aromatic fragrance and flavor. The transformation from an odorless fruit to a richly aromatic spice requires a long and methodical process called the "preparation".

The vanilla industry is divided into :

  • The part in upstream which consists of the vanilla farming and fruit recovery. This activity is performed by tropical countries, in particular Madagascar, which accounts for about 80% of world production.
  • The part in primary output, which includes the transformation of the fruit into a spice through a methodical process called "preparation". It sometimes takes place directly on the production site, but is often carried out by western multinationals.
  • The secondary downstream part which refers to the production of finished products (pod, powder, paste, natural flavor, artificial flavor, syrup or sugar) distributed to final consumers who are mainly in developed countries.

Vanilla is mainly used in pastry making but also as a perfume in cosmetology or in the manufacture of candles, beauty products, medical care or air fresheners for example.

The United States, France and Germany account for about 80% of the global vanilla trade between them and are the main players in the downstream part of the value chain. In contrast, the Madagascar provides the bulk of the world's vanilla supply, some of it upstream. For the past 10 years, world production has been around 2500 tons per year.

Apart from French Polynesia and Reunion Island, which grow it, the French market focuses on the import, preparation and sale of vanilla. The France is a European leader in the vanilla trade and represents 14% of world imports of vanilla, which it partly re-exports.

The market is relatively concentrated in terms of producing countries, but natural vanilla production is now facing competition from synthetic vanilla. This segment is growing due to its insensitivity to weather conditions and its very low price.

While vanilla prices have exploded in recent years, however, the year 2020 seems to herald a fall in prices and the global Covid-19 pandemic is expected to reinforce this trend. Finally, while artificial vanilla is gaining ground, some vanilla-using estates remain faithful to natural vanilla, thus supporting the development of more sustainable sources of supply with "organic" or "fair trade" products, for example.

1.2 An extremely volatile global market

World vanilla production World, **** - ****, tons FAOSTAT

In ****, the world vanilla production reached *,*** tonnes. The world's vanilla production has stabilized after several years of constant decline. Indeed, world vanilla production has fallen by almost **% compared to ****. This is due in part to the decline in usable land in the main producing ...

1.3 Vanilla, a product mainly imported into France

Vanilla is a product that is highly appreciated by the French. Indeed, it is considered as being the favorite aroma of the French [***]. Although a small part of the vanilla consumed in France comes from overseas territories such as Reunion or Martinique, the majority of this vanilla is imported. In ****, the ...

ANALYSIS OF THE DEMAND

2.1 A significant demand for vanilla in France

On average, France consumes *** tons of vanilla per year. This makes France the second-largest consumer of vanilla in the world, after the United States. Most of the vanilla consumed in France is imported, especially from Madagascar. As can be seen in the following graph, France is the second-largest market for Malagasy ...

2.2 In France, the sectors consuming vanilla are growing rapidly

Vanilla, in its raw form as well as in its pulverized or crushed form, has a very diversified use. Indeed, it is used on a large scale in France:

By the agri-food industry, in particular industrial chocolate makers (***); By the cosmetics industry, especially during industrial processes for the production of perfumes ...

2.3 Vanilla, a product prized by French consumers in its various forms

Vanilla is considered to be the favorite spice of the French who do not hesitate to consume on average *.* grams per year in different forms. Thus, vanilla is marketed under different forms. These range from natural vanilla beans to various synthetic vanilin molecules.

2.4 French consumers are increasingly sensitive to the composition of their products, as well as to the origin of their ingredients

Consumers are increasingly sensitive to the composition of cosmetic and food products, where some ingredients and additives may be harmful. Moreover, consumers are increasingly wary of the cosmetics and food industries and are paying more and more attention to product quality and the sustainability of the value chain.  The start-up Yuka ...

2.5 The COVID crisis has reinforced the upward trend in demand for organic and fair trade vanilla

The consumption of organic and fair trade food products has been greatly accelerated by the COVID crisis. In France, the health crisis is seen as proof of the need to change the food model: in April ****, **% of French people thought that the current economic crisis is a "the illustration that it ...

MARKET STRUCTURE

3.1 A complex value chain

Source: ****

The global vanilla value chain is complex as many different sized actors are involved. While the production is mainly done by small growers in poor countries (***), many specialized companies position themselves between small producers and exporters, to ensure the import of vanilla beans and their distribution. Companies specializing in the ...

3.2 Largely traditional production methods

Vanilla production is concentrated in the hands of countries with little or no development, such as Madagascar, which accounts for over **% of the world's vanilla production but who is the *th poorest country in the world in terms of HDI [***]. These countries are characterized by archaic production methods and a high ...

3.3 An unbalanced value chain

The fragmentation of the value chain, as well as the large number of intermediaries, gives significant market power to large industrial groups, to the detriment of small producers. Indeed, according to the study Recipe for Change, the need for improved livelihoods of vanilla farmers in Madagascar, in Madagascar, more than **,*** small-scale ...

ANALYSIS OF THE OFFER

4.1 A highly diversified production

There are over *** varieties of vanilla in the world. Nevertheless, three varieties of natural vanilla are commonly marketed, each distinguished by its characteristics and its place of plantation of origin:

Vanilla planifolia: It is the most widespread variety on the market today, it is produced in Madagascar, Indonesia and Mexico. It ...

4.2 Exponential rise in vanilla prices questioned

Vanilla is considered to be the most expensive spice in the world, after saffron. Indeed, a kilogram of vanilla costs between ***€ and ***€, far behind saffron whose kilogram can be worth tens of thousands of euros (***), but far ahead of other spices such as cumin, pepper or other whose price per kilogram ...

4.3 A supply characterized by high price volatility

The vanilla market is characterised by extreme price volatility. Indeed, the speculative boom around vanilla, which coincided with the strong growth in vanilla prices between **** and ****, has resulted in a reduction in global demand for natural vanilla and its substitution by chemical flavourings, notably vanillin.  As a result, after several years ...

REGULATION

5.1 Some regulatory issues applicable to food flavourings

Flavorings are subject to regulatory harmonization at European level under the regulation EC/****/****. The regulation (***) No ****/**** lays down the conditions for the use of flavorings. The regulation also specifies the prohibited flavorings and substances, the maximum doses that may be used for certain flavorings, and the labelling rules applicable at the ...

5.2 A specific regulatory framework for vanilla

A precise regulatory framework applies to vanilla at the European level. Indeed, the Regulation (***) governing flavorings and certain food ingredients, considers vanilla as a basic material with food status and lists the various traditional treatments to develop the flavor of the bean.

In France, the vanilla appellation is governed by a ...

POSITIONING OF THE ACTORS

6.1 A fragmented market

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Hugo Schott

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Mathieu Luinaud

Associate Consultant

Mathieu Luinaud

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Education Formation
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PhD Industrial transformations

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Pierre D.

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Pierre D.

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Arnaud W.
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Ross Alumni Club France

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Amaury de Balincourt
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Héloise Fruchard

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Market Research Analyst @Businesscoot

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Market Research Analyst @Businesscoot

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Jules D.

Consultant

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Alexia V.

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Emil Ohlsson

Emil Ohlsson

Anna O.

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