How Lafaza Foods Built a Sustainable Vanilla Business
There is perhaps no more popular flavor in the store bakery than vanilla. From vanilla cakes to vanilla cookies to vanilla custards, consumers never seem to tire of the spice. The pandemic only accelerated demand for the flavor as baking at home surged and shoppers added vanilla-perfumed sweets and other comfort foods to their omnichannel carts.
Now, however, the demand for the flavor is evolving, from plain old vanilla to vanilla with a story. And Lafaza Foods, a 15-year-old vanilla supplier based in Berkeley, Calif., is aiming to meet that demand with a three-pronged sustainability business model focused on forests, farmers and quality flavors.
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This “Triple-F Bottom Line” has guided the company’s growth for the past 15 years, from the co-founders’ early Peace Corps experiences working with rural vanilla producers in Madagascar, to a thriving company servicing retailers, wholesalers and foodservice operators.
“The founding principle of Lafaza was to take a sustainability approach from the very beginning,” says Nathaniel Delafield, co-founder and CEO of the company. “When you start with a sustainability model to begin with and build a company around sustainability principles and practices, it’s much more effective in terms of scaling out an approach that can be successful for more and more people along the supply chain over time.”
A Sustainable Foundation
Delafield founded the company with his brother after serving in the Peace Corps in Madagascar and wanting to help vanilla farmers there.
“The reason we started the company is these communities in Madagascar really challenged us when we got there to work with them on accessing more direct markets,” Delafield recounts. “They had been working with vanilla for several generations of farming, but at the same time they were very disconnected from the international supply chains that really affected them and that they were supplying.”
Madagascar supplies about 70% to 80% of the world’s vanilla, about 50% of which is used mainly in the United States. Lafaza, which is the Malagasy name for a palm tree that grows alongside vanilla in and around the lush tropical forests of Madagascar, thought that maybe there would be a way to look at the supply chain a little bit differently to help these farmers and communities.
“We looked around for partnerships and couldn’t find any companies or partners that were really interested in working on direct trade and sustainability around vanilla,” Delafield notes. “There was some work around sustainability and supply chains around coffee, of course, and folks working a little bit on cocoa, but nothing around spices, and really nothing in Madagascar.”
So, Delafield’s company set about building its sustainable vanilla business model. From the very beginning, Lafaza took on sustainability as sort of a three-pronged approach.
1. Environmental Sustainability
“We wanted to make sure everything we were working with really spoke to the unique and sort of amazing environment of Madagascar,” Delafield says. “We wanted to have principles and farming practices that really respected the environment of Madagascar and provided conservation and ecosystem services around communities, because the farming that we work with is largely agroforestry farming systems that are very complicated. They feel and act a lot like natural forest, and they provide a lot of those services that a natural forest would: soil, regeneration, water filtration, animal habitats and many other things as well. So environmental factors were the first pillar for us.”
2. Social
“We wanted to make sure that everybody who was working with our company and the supply chains we were involved in had benefits that were equitably shared along the value chain,” he continues, “and we wanted to make sure that we were involved in improving livelihoods and communities at all points. We wanted to make sure that there were positive social outcomes from our work everywhere.”
3. Economic
“Sustainability to us is also about financial and economic sustainability,” Delafield emphasizes. “It’s very important for people to have strong livelihoods and economic viability; we needed to have a strong financial base for our company. We wanted to make sure that communities were thriving financially, and we wanted to make sure that our model was built on a real, scalable financial model of business in the vanilla and spices industry and trade, so that no matter what happened, it still could function and thrive as a very standard business as well, and so could all the folks and businesses that we work with along the way.”
Lafaza now works in four regions of Madagascar with hundreds of farmers each year with organic and fair-trade certifications. It also works with a much larger farmer network each year on sourcing vanilla beans. The company sells products not only to grocery stores, but also to retail bakeries and other operators.
“Our bread and butter in the beginning was really about providing ingredients to brands and also to store bakeries and restaurants,” Delafield explains, “and we still do quite a lot of that type of business. We’re very able to work with a bakery department, a bakery division within a retail outlet, or work with bakeries directly if they’re third party, where we can be providing much more of a bulk-format product, but still the same great flavor that we offer, whether it’s an organic-certified vanilla extract or even a commercial, more concentrated extract.”
According to Delafield, one of Lafaza’s advantages is the strength of its supply chain. “Our supply chain is so valuable to a retailer,” he says. “The last thing you want to do is get into a retailer and then struggle with the fill rate on the shelf. That’s where a lot of our peers are struggling right now, but from the way we go about our business, we’re in the high 90s in terms of fill rate percentage.”
Demand for Clean Label
Sustainability has become a big deciding factor for consumers when they choose a product, according to Dr. Krishnakumar “KK” Davey, president of client engagement at Chicago-based Information Resources Inc. (IRI). According to IRI, sustainability-marketed products had a compound annual growth rate of 7.34% from 2015 to 2021.
“We asked consumers how much sustainability drives their product choice, and 74% of consumers say it is ‘very important’ or ‘somewhat important’ when selecting products to buy,” says Davey, citing IRI data. “Sustainability is a key driver of product choice. Half of consumers say they are choosing products that are more sustainable now than did 12 months ago. This again skews a little more towards Gen Z and Millennials than other cohorts.”
“Sustainability factors are becoming really important and much more on the radar of large and small players in the food and beverage industry, and other industries,” Delafield notes. “It is really widespread now as something that’s important. When we started our company, it really wasn’t. Next to cocoa and coffee, vanilla is the crop that gets the most attention from consumers regarding sustainability and transparency.”
He adds that there’s an “undeniable trend” in grocery stores toward natural and premium-quality traceable ingredients.
“There’s just no question that people care about the clean-label approach: Whether it’s from a bakery item within a store, or a shelf item, formulation matters,” Delafield asserts. “People are looking for all-natural, they’re looking for something they can understand. And they’re also looking for something that they can figure out where it came from, who made it and why is it good for me? I think that’s where our model and our approach to trade, as well as our approach to quality and delivery to the consumer on these flavors, really shines.”
The other trend in the grocery store when it comes to vanilla is experimentation. Delafield points out that retailers, food producers and manufacturers are all experimenting with vanilla in diverse applications.
“A lot of times, you’ll find there’s a background supporting flavor like vanilla there that’s really making a food come alive in a different way,” he says, “and I think we are seeing the use of vanilla in a lot of different respects being tried out. Some of them are great hits, and some of them maybe aren’t working quite as well.”
Delafield has observed that when it comes to vanilla products, retailers are looking for at least five key attributes.
“In conversations with retailers, especially when it comes to baking, they want simple, they want clean, they want traceable, they want full flavor and they want cost accessibility,” he explains, “and some of them want organic. We’re able through our direct trade model to get those five and have cost accessibility.”
Delafield goes on to note that the categories using vanilla extracts that are expanding the most are plant-based foods and beer.
“Plant-based, whether that’s ice cream or a lot of these different areas, we are having a lot more plant-based inquiries,” he says. “Another area that’s growing is craft beer. We do a lot of work with breweries. Believe it or not, vanilla is a key component to a lot of what they do.”
Lafaza’s retail vanilla line is currently available nationally through several distributors, including KeHE, Garden Spot Foods and Associated Buyers. Lafaza also works with regional foodservice distributors and directly with many foodservice and manufacturing customers to supply premium vanilla and spices. The company’s future plans include the launch of new products this year that are sugar-oriented.
“Vanilla sugar is a product that we’re excited about, and cinnamon sugar as well,” Delafield enthuses. “We are diversifying our line and also our work with growers in Madagascar. We’ve also expanded our supply chain.”
That’s a very good thing, considering that the demand for premium vanilla in every kind of product shows no signs of fading anytime soon.
“As long as there continues to be innovation in bakery and dessert, and in savory uses, vanilla’s going to be a key component,” Delafield observes. “This is because it is both a great flavor on its own, [and] it’s also a wonderful base on which to build other flavor profiles, to really highlight other flavors in a way that, without the vanilla in the formulation, they wouldn’t come alive.”
