Vanilla Production in Madagascar - Social and Environmental Issues in This Supply Chain - Coursework Example

• A detailed analysis of vanilla production in Madagascar and of the entire supply chain (from farmers to consumers)

Madagascar has long been the major exporter in the vanilla market by covering two-thirds of world demand (Brown, 2009, p.242). Currently, the share of Malagasy vanilla is still high and reaches 40% of global exports (Tovonjatovo and Dong, 2015, p.105). By being the important plant for the national economy, vanilla grows only in several areas combined in the unified SAVA region (Sambava, Antalaha, Vohemar, Andapa) (Parker, 2008, p.6).

For the operation of the vanilla supply chain, the role of government has always been critical. Back in 1962, the country entered the cartel “Vanilla Alliance” with the islands of Comoros and Reunion and increased its influence on the world market with the vanilla of exceptional quality (Cadot, Jaime and Laure, 2008; Brown, 2009). Because of this global prestige, Malagasy government possessed the strict and destructive control over the local vanilla supply chain. In this context, the previous involvement of government in the vanilla supply chain led to the appearance of low prices for its producers and high export tariffs for the importing countries (Brown, 2009, p.249). Soon, Indonesia emerged as the key vanilla exporter, which led to the expected collapse of the vanilla market in Madagascar in the mid-1990s. In the recent years of the supply chain existence, it started experiencing liberalisation (Brown, 2009, p.250). Currently, the government regulates only the sanitary and quality inspections and frames vanilla marketing (Cadot, Jaime and Laure, 2008, p.15). However, it also benefits from transaction fees (Parker, 2008, p.16). Based on the mentioned above, Malagasy governmental actors remain the important players in the vanilla supply chain.

On the earliest stage, the production of Malagasy vanilla starts not on the plantations but by 80,000 separate smallholders who work with their families on its planting (Brown, 2009, p.251). During the manufacturing process, the time costs are high because the plant becomes productive after three years of growing only (Cadot, Jaime and Laure, 2008, p.8). Besides, workers put much effort in vanilla fields. For example, farmers fertilise about 1000 plants during the vanilla flowering season to earn approximately 330 kg of green pods (Lancy and Turner, 2015, p.819). In general, vanilla beans growing process requires 260-man days per hectare during the first year and almost twice more during maturing age, including efforts on curing, preparing, and packing (Cadot, Jaime and Laure, 2008, p.8). Besides, the process of storing for reaching the necessary flavour can take up to two years along with high risks of moulding (Cadot, Jaime and Laure, 2008, p.8). Based on these difficulties of vanilla maturing, the quality of this product varies (Parker, 2008, p.10).

On the next stage of the supply chain, there appear collectors who buy vanilla from farmers. By combining the role of preparers, these approximately 6,000 collectors serve as the intermediates between farmers and exporters (Parker, 2008, p.12). For sale, the government issues unique stamps of ownership and determines the date for the communal markets in villages (Brown, 2009, p.251). However, the amount of product and its price is negotiated, so collectors have to travel all over the country to arrange the trade (Parker, 2008, p.10). In fact, they set the price of the purchase according to exporter association standards (Brown, 2009, p.251). At the same time, frequently collectors put the combined pressure on the farmers to reduce the price (Parker, 2008, p.13).

After buying the prepared vanilla from either collectors or farmers, the registered exporters sell the Malagasy vanilla to reach the consumers in Western countries with the help their constant importers. These 33 actors have the national body of Le Groupement National des Exportateurs de la Vanille (GNEV) that regulates their activity for the Malagasy vanilla industry interests and serves as the intermediate with the government (Parker, 2008, pp.13-14). In fact, there are three key importing countries for the vanilla from Madagascar: the USA, France, and Germany (Cadot, Jaime and Laure, 2008, p.8). At the same time, the destination of vanilla also depends on its quality. In this context, industrial vanilla for the extracts goes to the U.S., and the high-quality bourbon type finds its destination in Western European countries (Parker, 2008, p.15).

In the importing countries, the vanilla packages reach their consumers. They include numerous retailers, flavour houses, distributors, and end-users. In this context, all these actors acknowledge Malagasy vanilla among the other types. As for the retailers, they mention the origin of vanilla in the cases of Madagascar, Mexico, and Tahiti due to the unique flavour characteristics of them (Brown, 2009, p.256). With the help of these numerous actors within the importing countries, Malagasy vanilla reaches its consumers.

• A detailed analysis of social and environmental issues in this supply chain

In general, the roots of social problems within the vanilla supply chain in Madagascar include both the highest rate of tropical hurricanes on the continent and a combination of poverty, undeveloped technology, and the lack of livelihood sources (Brown, 2009, p.241). Following, the current design of supply chain is ineffective regarding adapting to the dynamic market. It is critical that the farmers receive money too late from investing in technology (Brown, 2009, pp.251-252). In this context, the lack of public institutions cause the disintegration of farmers and their inability to articulate and defend their interests (Cadot, Jaime and Laure, 2008). In addition, the fact that Malagasy farmers do not control any further stage of vanilla production discourages them from putting enough effort for the product of the highest quality. Moreover, the corruption is also a problem for Malagasy vanilla supply chain. As illustrative examples, its design allows the collectors to push on villagers for price reduction and the exporters and importing distributors to benefit from the price increase for retailers (Parker, 2008). As Brown (2009, p.249) writes, the extremely low prices discourage vanilla farmers from keeping the quality standards of this product. All these factors together result in the high levels of the vanilla price and human vulnerability.

Within the supply chain, bourbon vanilla from Madagascar has the position of an organic product. In particular, numerous scholars acknowledge that this plant does not require pesticides and equipment (Cadot, Jaime and Laure, 2008, p.8). Besides, the vanilla crops are environmentally sustainable and are not highly susceptible to bird infections. Moreover, they fit environmental NGOs recommendations on reducing land pressure with commercial cultivation (Laney and Turner, 2015). However, the lack of technological development reveals with the appearance of distinct environmental problems. In particular, bourbon vanilla usually has more than 200 volatile compounds in its content, which requires such complicated measures as direct thermal desorption, solid phase microextraction, sorptive stir bar extraction, and GC-MS (Gurnani, et al., 2014, p.770). In other words, the pure image of Malagasy vanilla is hard to control due to the technological backwardness of the supply chain.

• An identification of which issues are key to the retailers’ role and an assessment of their criticality for this role

In the block of social problems, corruption within the vanilla supply chain is the most critical issue for the retailers. In particular, these actors are the victims of contracts between Malagasy exporters and the importers in their importing countries and pay more than they should for vanilla. This situation is the highest concern for the retailers. Also, the technological backwardness is also hazardous. Since the customers expect bourbon vanilla to be the best product on the market, the inability of Madagascar to guarantee its constant quality puts retailers at risk. Since retailers communicate with customers directly, they are highly interested in their satisfaction with tasting this product.

As for the environmental concerns, the risk that Malagasy vanilla does not meet the established expectations of price and quality causes the problems for retailers. In fact, the key issue here concerns the quality of vanilla made in Madagascar. In this context, the accordance of bourbon vanilla from Madagascar to its image as the product of the best quality is crucial for its retailing. Besides, the concerns of the price for bourbon vanilla are also actual for the retailers. If vanilla from Madagascar offers low quality for the extremely high price, retailers can refer to the alternative manufacture forces (including chemical precursors) that satisfy the growing supply of vanilla (Culp and Prasad, 2013, p.1823). In other words, the retailers can choose and switch to the cheaper and less risky vanilla extracts that satisfy customer demand in the shops and supermarkets. Thus, the main problem for Malagasy vanilla is that most of the customers turn to synthetic substitutes of natural vanilla (Cadot, Jaime and Laure, 2008, p.15). Since bourbon vanilla does not justify its high price with high quality, there will be no reason for retailers to buy it.

• A clear bargaining strategy (what is acceptable, what is not, clear propositions for standards, and so on) during the role-playing game

In the interests of retailers, the clear and predictable supply chain it the priority during the role play. In general, the retailers do not participate actively during the RSV. Because the key issues within the supply chain refer to the local people, retailers as the actors in the importing countries mostly deal with the results of their efforts. However, there exists the problem that importers and exporters have the negotiations of re-selling the vanilla for the much high price to retailers (Parker, 2008, p.22). On this aspect, it is crucial for retailers to insist on the anti-corruption regulation within the vanilla supply chain. Moreover, the key standards for the vanilla supply chain should guarantee that the retailer accepts the sustainable quality of the product for the fixed price in the predictable timeframe. Besides these critical claims, the overall role of the retailers during the discussion is to control that the round table does not turn into the finger-pointing that does not solve any problems. In this context, the social problems can distract the meeting from the effective decision. At the roundtable, the quality of the vanilla beans must remain the main concern. Thus, no ideas that sacrifice the quality to any other concerns (including social stabilisation and environmental regulation) are acceptable during the RSV for the retailers.