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1 IMG 9413Vanilla beans provide an above average return for Tanzanian farmers.

Tanzanian firm partners with MEDA to grow farmers’ income

By Mike Strathdee

MOSHI, TANZANIA — Juan Guardado has abandoned several careers that could have made him quite well-to-do.

Money has been less important to him than making a difference and improving people’s lives.

“You have to think about what your legacy is going to be,” Guardado said of his abandoned career paths during a tour of NEI, the extracts firm he co-founded in 2011. “I definitely don’t regret it.

“When I go see the farmers, some of them just run out and give me a hug. A lot of clients in consulting don’t necessarily do that.”

NEI (Natural Extracts Industries) is a MEDA partner that is working to raise the living standards of thousands of Tanzanian farmers, primarily by teaching them how to grow organic vanilla.

Guardado was born in El Salvador, living there the first four years of his life. After college in the US, his early career was in the computer graphics industry, working for Matrox Graphics and NVIDIA Corp.

Wanting his legacy to be something more than pixels, he worked for McKinsey’s Business Technology Office in London, England, focusing on management consulting in the areas of health tech and health systems.

Discussions about becoming a partner at McKinsey’s didn’t seem fulfilling either, so he moved to Tanzania in 2010.

NEI came into existence the following year. His partner, Silas Losinyaari Noah, oversees the firm’s supply chain team, does government liaison and acts as legal secretary for NEI.

For the first three years of the business, NEI focused largely on training farmers and planting vanilla.

All but two of NEI’s 30 full-time and two part-time employees are Tanzanian nationals. Guardado expects the firm will grow to 50 staff this year.

More significantly, NEI plans to double the number of farmers it works with by the end of 2019. They currently have relationships with 3,000 farmers, about half of who are actively harvesting.

1 NEI Juan tells his storyJuan Guardado tells the NEI story to MEDA staff and supporters. Juan Guardado pic by Mike Strathdee“If you’re going to do economic development, it’s going to be in agriculture,” he said. “Seventy per cent of the people are employed in agriculture in some way, 30 per cent of the GDP comes from the agricultural sector, so clearly, that’s where it’s at.”

But he didn’t want to work in commodities. “In commodities, you’re fighting for the pennies. And yes, there is big volumes, but what we’re trying to do here is the opposite — we’re trying to push the price up for the farmer, give them an income.”

Giving farmers an income means a better-than-average return. NEI’s top-performing farmers last year earned $1,500 US for their vanilla beans.

That’s significant in a Tanzanian context, a doubling of purchasing power for some. A 2015 United Nations report suggested that the average small Tanzanian farm was only .9 hectares (just over 2.2 acres) and produced food worth $790 a hectare.

Knowing that he is creating value for the farmers, and that they appreciate those efforts, is deeply satisfying for Guardado.

While he recognizes that NEI has a long way to go, he feels the firm is already having an impact in a very tangible way. “I’m not just going to trade the vanilla. I’m going to try to add value by making the extracts.”

Initially, the firm sent small volumes of pods to online retailers in the US. Gradually they got more orders from Europe. Then orders switched to Indian Ocean islands, including Mauritius, during a crisis in Madagascar, which was a major vanilla supplier. Those buyers wanted extracts. (NEI currently produces vanilla, orange and cocoa extracts.)

Later, they turned their attention north as they began getting interest from online retailers in Europe.

When he and Noah started NEI and decided on their business focus, they found vanilla being grown, but very little of it. That forced them to focus on establishing the value chain, a slow process.

From 2012 to 2015, they barely had any harvest, spending their time working with farmers, planting and training. Over the past three years, they have seen steadily increasing production. NEI’s 2017 vanilla harvest was 2.5 times the previous crop.

This year, they expect at least doubling of production from newer farmers, and a lot more from producers with more mature vines.

1 NEI logoNEI produces organic vanilla extract.Last year was pivotal for NEI, as a luxury ice cream manufacturer found the company and said they wanted to direct source NEI’s vanilla. Luckily, NEI had implemented a traceability platform that allowed them to identify where shipments come from after registering farmers on mobile tablets.

“The value proposition for the ice cream manufacturer was clear: high- quality, unique flavor profile, full traceability, and because it’s direct, at a lower price than they were getting in the US.”

The ice cream manufacturer, which he cannot identify, has a deal with Sam’s Club, a major US retailer, for at least 2.5 million litres of Tanzanian direct-sourced vanilla ice cream. That product should be on store shelves this spring.

To meet this demand, NEI has been increasing the number of farmers they work with and ramping up efforts to increase production from existing producers. They hope to get organic certification for their products this year.

As they work to scale production, NEI has reduced its processing time for extraction from 15 days to six days.

They currently operate in four regions of Tanzania, unique among vanilla processors. Eventually, they hope to expand to two more regions.

Other future plans include expanding into cocoa. Recently, NEI has had inquiries from Japan, Germany and Turkey.

The vanilla extract market is very opaque both in terms of pricing and volumes, Guardado said. Global demand ranges from 3,000-7,000 metric tonnes, depending on the source.

Media reports in Canada this winter suggested that a global surge in the price of vanilla will push prices to record levels, as much as 20 times what it sold for only a few years back. Part of that is blamed on a 2017 cyclone hitting Madagascar, a world-leading vanilla producer, destroying a third of their expected 2018 output.

Guardado suspects a cartel in Madagascar may be holding back supply to keep prices high.

But he thinks demand is growing as major food manufacturers — Nestle, Unilever, General Mills and Hershey, to name a few — have all switched to natural ingredients or are in the process of doing so.

As this trend increases, the market for vanilla will split into niches. “Nowhere do I see slack in actual demand.” ◆