In 2016, the vanilla market dropped to 7 100 tons, caused by the reduction of global vanilla production due to harvest cuts in Madagascar and Indonesia. At the same time, demand for vanilla continues to grow against the backdrop of growing demand from the food, flavours and cosmetic industries. Shrinkage of the world vanilla market was caused by a supply shortage, which led to a record level price increase. A price surge provoked a significant increase in the vanilla market value from 2011 to 2016. In 2016, the market value reached $854 million, which is twice the level of 2015 and four times higher than the level of 2007.

The US and Indonesia remain the main consumers of vanilla

The countries with the highest consumption are the United States (US) (18%) and Indonesia (13%), followed by Papua New Guinea (6%), Mexico (6%) and France (5%), together comprising almost 47% of global consumption. This is according to estimates by IndexBox.

Amongst the leading vanilla consuming countries, the highest level of per capita consumption was recorded in Papua New Guinea (53.5 gr/year), while the global average per capita consumption of vanilla was estimated at 1.0 gr/year in 2016. The other countries, listed above as the largest consumers of vanilla, also showed per capita vanilla consumption above the world average: France (5.6 gr/year), the US (3.9 gr/year), Indonesia (3.5 gr/year) and Mexico (3.2 gr/year). The high level of vanilla consumption in these countries is due to its widespread use in the food and perfume industries.

Moderate growth in consumption forecast

The world vanilla market largely depends on the production in Madagascar. In the medium term, production in Madagascar can fluctuate significantly due to crop losses. Speculation in the market exacerbates the situation by artificially inflating the vanilla price.

Significant consumption growth in terms of the vanilla market is not currently forecast. In 2017, it is expected that the world market will continue to shrink due to harvest losses in Madagascar after a strong cyclone, which reduced the crops by about 30%. However, by 2025 the world market is expected to grow by + 1.3% on average per year. By 2025, the market is expected to grow to 8 000 tons against the backdrop of the growing demand from the food industry for vanilla as a natural flavourant. A number of factors, including the impact of poor weather conditions on production figures, and price speculation can result in considerable market fluctuations, as noted in recent years.

Decline in vanilla production

Global vanilla manufacturing illustrated negative dynamics in terms of production over the last few years. In 2016, the volume of production dropped to 6 530 tons, falling with a CAGR of -4.2% from 2007 to 2016. The reduction in world vanilla production is caused by a decrease in yields in Madagascar and Indonesia due to crop losses against the backdrop of poor weather conditions, drought and harvesting vanilla beans at an immature stage by small producers.

Madagascar was the key world vanilla producing country with an output of about 3 831 tons in 2016, which accounted for 49% of total global output. The other major producers were Indonesia (24%), Papua New Guinea (7%) and Mexico (5%).

Vanilla is a widely traded commodity, with the share of exports in total global output at approximately 94% in 2016. The high trade intensity is determined mainly by the substantial distances between the main centres of vanilla production and the key consuming countries. In addition, the significant exports share in production is due to the fact that importers pre-stocked vanilla beans in anticipation of a price hike and, in 2016 exports increased.

In 2016, the volume of global exports totalled 6 137 tons, going down by -22% against the previous year level. Despite a significant drop in 2016, overall the global vanilla exports indicated a pronounced growth from 2007 to 2016. The trend pattern, however, indicated some noticeable fluctuations throughout the analyzed period. The total exports volume increased at an average annual rate of +0.4% over the last nine years. Over the period under review, global vanilla exports attained its maximum volume of 7 577 tons in 2015. However, in 2016 total vanilla exports declined to the level of 2009 and 2012.

In 2016, Madagascar remained the largest exporter of vanilla in the world, comprising 43% of total exports. It was followed by Indonesia (10%), France (9%), Germany (7%) and the US (5%), Canada (4%) and Belgium (4%). From 2007 to 2016, the countries which increased vanilla exports to the international market most were Belgium (+14.2%) and the US (+11.0%). Exports from the other countries (including Madagascar) remained relatively stable over the period under review.

The US remains the largest consumer of global vanilla imports

The volume of global imports totalled 6 739 tons in 2016. Imports dynamics was generally in line with exports: these trade flows globally complement each other.

In 2016, the US (24%, based in physical terms) was the leading destination of vanilla imports. It was followed by France (13%), Germany (9%), the Netherlands (5%), the UK (4%), Belgium (4%) and Canada (4%). All these countries together made up 63% of global vanilla imports.

Among the major importing countries Belgium (+10.4%) gained the highest annual growth rates from 2007 to 2016, while the Netherlands (+4.9%) displayed more modest paces of growth.

The UK (-10 percentage points), the US (-7 percentage points) and Canada (-3 percentage points) saw their shares in global vanilla imports reduced. The shares of the other countries remained relatively stable throughout the analyzed period. – IndexBox