Supply & Demand Assignment

Article: https://www.thespec.com/news-story/8335988-global-vanilla-prices-squeeze-margins-for-ice-cream-cupcake-makers/

Due to an increase in demand and a decrease in supply, natural vanilla prices are skyrocketing.

Consumers are increasingly demanding natural ingredients in foods that they buy. This includes flavored desserts like ice cream and chocolate that use the ingredient vanilla which is mainly grown in Madagascar. This increase in demand due to buyer’s preferences has pushed the price of vanilla upward, making goods containing it more expensive. About seven years ago, vanilla prices approximately increased 10% a year. Two years ago the price doubled, and just last year the price had increased to five times to what it was. The current cost for a kilogram of premium vanilla beans is $850, $830 more than it was five years ago.

In addition to rising demand, the crops of Madagascar have been severely damaged by a cyclone that passed through, destroying a significant amount of their output. Due to the number of sellers in the vanilla bean market, securing vanilla beans for operations is becoming extremely difficult, especially for small mom-and-pop shops that aren’t taken as a priority when considering the big players of the convenient food industry. Some small businesses have considered dropping items containing vanilla altogether from their menu. The cyclone of 2017 was the biggest factor in the extreme price jump for the vanilla beans. Below is a graph illustrating these changes in the vanilla bean market.

Supply & Demand Assignment Graph

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