Please introduce Symrise to our readers.Symrise is a German company with about a billion euro in sales in the flavour space. We also have a fragrance division and a nutrition division, including products such as food powders.
We are actually a relatively new construction that is about 15 years old. Symrise is the result of a merger of two old German companies (established in the 1800s), and for the first 10 years following the merger, the company was really focused on combining the two entities and enhancing its market position among customers and advancing its technologies.
I think we are now slowly starting to get out of our shell and are becoming more confident as a company. We’re really starting to get a lot of attention from our customers. In the last few years, we’ve become one of the fastest growing flavour houses in the industry.
Vanilla is a core flavour for Symrise, and I understand the company is quite involved on the ground for vanilla. Do tell us a little bit about that and what the company is doing.
In 2006, Symrise decided to do something a little different in the vanilla industry that what the other flavour houses were doing back then. We decided to really cut the supply chain and go all the way to the farmers. Today, we are directly engaged with 7,000 farmers in Madagascar, and equipped with our production facilities on the ground as well.
Why we decided to cut the supply chain is because vanilla is a very complex growing crop. There are only smallholder farmers for the crop, small family farms, and we felt that to maintain both the supply and the quality, we really had to engage ourselves to activate the farmers.
Not only in terms of trading, but engaging ourselves with education on vanilla and around agricultural vanilla, as well as with the education of their children, and providing health facilities for the farmers. Reason being, when it’s a single family farm, if the primary farmer gets sick, then there would undoubtedly be a crop issue; if the children are not able to go to school, then there will be an issue with the next generation of farmers.
We have found that involving ourselves with both the farmers and the communities was also good for our business in terms of securing supply as well as quality.
You mentioned Symrise is working with the farmers, can you expand on that?
We have several programmes that we have established together with different non-govermental organisations (NGOs) over the last 10 years. We recognise that as Symrise, we are not specialists in delivering health care in Madagascar for example, so we partner with people who specialise in that.
With our programmes, we establish personal relationships with our farmers. Not only do we ensure they have proper healthcare, but we also provide them with education and the knowledge for how to grow the best vanilla possible. The vanilla market is quite turbulent, so vanilla farmers are very much living day-to-day. And so at the moment, we’re also focusing on helping them build up their business and general life skills.
This is especially important now that the price of vanilla is high. With high vanilla prices, the farmers earn more money, so we educate them on how to save that money and how to open a bank account to help them keep their savings safe. If the farmers face livelihood problems, that would affect us too as it will influence the next crop of vanilla. So it is important for us that we take them on that journey.
We are directly engaged with about 7,000 farmers today, which is only about 10 percent of the total number of vanilla farmers in Madagascar. But we are, by far, the organisation that has the most outreach to farmers in terms of number of farmers involved, and also the level of involvement that we have with them across so many fields.
From putting them through school to training them on agronomy of vanilla bean and to teaching them how to manage money, sell, and trade vanilla, we ensure that we achieve the best quality of life for our farmers.
Would you say there’s a slight conflict of interest when you’re helping the farmers?
To others, they might say that we are helping the farmers in order to ensure that we stay competitive, benefitting us rather than them. But to us, it’s really more of making the farmer sustainable. It’s not about squeezing them this year so that we can make more money next year; it’s about ensuring that they can manage some form of minimum income so they would be able to constantly feed their family.
And for our customers, they would want supply security, first and foremost. They would not want big price valuations, which can be brought about if vanilla prices are turbulent due to inconsistent supplies. When you have a brand in the market that has vanilla in it, you would not want to change the price of that brand every season just because the market is stuck; having that security of supply is therefore what dissolves that conflict of interest basically.
Another smallholder commodity crop is cocoa, are the two similar?
Yes and no. They are both smallholder crops, but cocoa is much bigger as a crop, and it’s more industrialised. There are very big players in cocoa like ADM and so on, and for many years they have taken the commodity model that they have from corn and other such crops and placed this into cocoa; this has not yet happened in vanilla.
Vanilla is on a different scale than cocoa. I think it’s much more personal. Firstly is because of the need for hand pollination. A farmer would only have a few orchids, which is already different from cocoa which in a sense is a little bit more industrial and commercialised; cocoa farms on average are three to four hectares, whereas vanilla farms are only one to 1.5 hectares.
Also, on cocoa farms very often there are more employees—it’s more an agriculture with employees and not so much a farmer owner. Whereas with vanilla, most of the time the farmers are farmer owners.
In terms of size, I think vanilla is not as big as cocoa, and cocoa has trading markets that are very active, so there’s a lot of paper speculation as well. In contrast, vanilla does not have a paper market per se; it’s only a physical market, so that makes it a little different from cocoa.
Also, vanilla growing takes a lot of patience. When you plant vanilla, it will take three years before you can get the first crop to make money. In that span of time, what are farmers going to feed their families with? Cash crops would always be more convenient and profitable for farmers in this case, especially when vanilla prices are low, like how they were in 2005 to 2012. Back then, both the supply and sale prices of vanilla were low, which did not give farmers the incentive to grow the crop when compared to other crops.
Adding on further to that, for a food manufacturer, the average span of cocoa is higher than vanilla, because cocoa is a physical ingredient. It’s not a tiny ppm of dosage, so any price variation on cocoa has a bigger impact on the food manufacturer.
That said, at the moment, the vanilla price impact is so big because of its record high cost of 500 (US$562) euros per kg, that even at very low dosages, it is starting to impact significantly the final product.
Are there any problems with working with the farmers? How do you overcome them?
Working with the farmers can be a little difficult at times, especially when we want to improve the quality of the vanilla.
It’s not like we can come in to a big town hall and say, “These are the new Symrise guidelines for 2017. Please follow.” When big foreigners come in and tell the farmers, “I know better, you need to do this and this”, that’s not going to go down very well when they’ve done this for generations.
That’s why being there for a long time and building these relationships can create strong trust between us and the farmers. In this way, we can show them how small changes can improve things for them in terms of the way the crop grew or the way the money comes in.
When you’re managing the farmers, you have to make sure that the farmers are connecting, that they have platforms to exchange information with each other so as to ensure the quality improves year by year. When we find a good practice with the farmer, we experiment it, we test it, we validate it, and we share it with them. Therefore we need to make sure that all our farmers are connected.
The way we reach out is really personalised, that’s our structure. We have agronomists who are based there permanently, as well as personnel who work their full-time, in Madagascar, in the fields.
Having been there for a long time to establish interpersonal relationships with the farmers, we count on these 200 personnel to listen to the farmers on what they need, what they have to share, what challenges they are facing, what they think about any changes we make, etc.
We then help them resolve whatever challenges they have and propagate the beneficial tips from successful farmers onto the others. It’s really a developing partnership that is suitable to the environment.
And I guess we do have the will to make continuous improvements to help the farmers deliver great quality vanilla beans and improve their livelihoods for them, for their family and for their children.