This weekend, everyone involved in the world of spices is coming together in Mumbai: be it from the Indonesian Foreign Ministry, the US regulatory authority or the Indian packaging industry. There is already a lot of need for coordination in an industry that ships its powders, buds and seeds all over the world, past a mass of requirements regarding quality and sustainability.
But since the war in Ukraine, other issues have also been affecting the industry. The costs for fertilizer and freight have exploded at times. The situation was similar with raw materials and packaging, as the spice industry trade association in Germany complained.
The weakening consumer mood, the economic downturn in the USA and Europe, the war in Ukraine: his industry is feeling the effects of all of this, says Sarada de Silva, former head of the Spice Council of Sri Lanka. De Silva is itself one of Sri Lanka’s largest spice exporters. The major crises are that the EU has raised its standards for organic spices, making it more difficult for exporters to meet them. An unusual drought also affected production. The list of problems is long. De Silva will also be speaking at the Spice Congress in Mumbai on organic production and how producers can meet customers’ high standards.
Association: Poor demand is a concern
The German spice industry is also one of these customers. In addition to China and Madagascar, it imports the colorful powders primarily from Vietnam, Brazil, Indonesia and India. Ginger, pepper and paprika accounted for more than half of the import volume last year. Incidentally, the increased costs along the supply chain did not find an outlet on German supermarket shelves: the price increase for spices in Germany was significantly lower than for other foods. In August the annual rate was still a good five percent.
“Certainly the situation – as everywhere in the food industry – is no longer quite as tense as it was at the beginning of the year,” says a spokeswoman for the spice industry trade association. The costs for containers from overseas have fallen again. The association is now worried about the lack of demand. The amount of imported spices fell in 2022 for the first time in ten years.
Consumer sentiment is clouding over
There are many reasons for that. During the pandemic, the industry benefited from the trend towards cooking at home, when restaurants were closed and distant countries remained inaccessible. This trend is now ebbing. On the other hand, consumer sentiment is deteriorating due to inflation, which is particularly visible in sales of organic and fair trade spices. “In the spice sector, people often resort to cheaper products,” says the trade association.
It is difficult for consumers in this country to understand how sustainably spices are produced. Seals such as Fairtrade or Organic can provide a rough guide. Surveys have shown that products with both seals in particular are produced sustainably, as Julius Wenzig says. Wenzig researches spice supply chains at the University of Witten/Herdecke. “Similar to the organic industry, demand for such spices has recently declined.” This reduces the incentive for producers to grow their spices sustainably.
Because value chains usually begin in developing countries, they are particularly vulnerable to violations when it comes to sustainability, as Wenzig warns. “Similar to cocoa, these are critical raw materials that need to be looked at closely,” he says. This applies to human rights as well as to environmental protection.
It is likely that small farmers will end up bearing the strain of the industry, as Felix Gies from the fair trade trader “El Puente” says. “Ultimately, the exploded costs will probably be passed on to the weakest link.” These are mainly small farmers who are not organized in large cooperatives, says Gies. This makes it all the more important that retailers and producers enter into long-term and fair partnerships. “Then both sides will get through the crises well.”
