1.7 SPICES

The spice trade has its roots in ancient times, with records of trading activity being conducted before the times of the Egyptian pharaohs. Traditionally, the high prices obtainable for rare spices justify the risks of the long journeys the traders needed to take to obtain supplies.

Today transport costs are low and hazards few, yet the differential between the price the tropical farmer receives and the price paid by customers in temperate, industrial countries is still enormous. Black pepper, for example, is traded internationally at about US$2500 per tonne but is sold in Western supermarkets at the equivalent of US$25,000 a tonne. Clove producers, who must pick each bud, sell their product at US$750 per tonne and a tonne contains over 10 million individual clove buds. These are sold at the equivalent of about US$50,000 per tonne to housewives in industrialised countries.

Clearly there are some costs involved in getting spices into the shops, but the bulk of the difference is taken by the packers and retailers. Such costs apply to most tropical products that sell with far lower profit margins, however. So why are spices different? It seems that there are several reasons. One important factor is the insignificance of the purchase of spices by Western consumers. Most families in industrialised countries spend less than US$10 per year directly on tropical spices, another factor is that industrial and individual customers in developed countries demand totally clean food products and are suspicious of such products if they originate in a developing country.

Customers can be fairly sure that they will pick up a harmful germ from a food product if it is packed in a fancy bottle or box which has the name of a local processor printed on it. Food processing companies in the developed world are subject to strict health regulations and would go out of business very quickly if any of their products harmed people.

Very large industrial consumers want to buy from companies that will guarantee delivery exactly on time and to the required specifications. For this reason they prefer to buy from established spice merchants rather than from growers in tropical countries.

Few spice growers in the tropics are able to invest in supplicated cleaning, processing, packaging and printing equipment or quality control systems and, even if they could, it would be difficult to convince buyers based in developed countries that they could convince buyers based in developed countries that they could produce a product of quality guaranteed by their local processors. Spice growers are, therefore, in a very weak position in their market.

Most spices are grown in several different countries and it has proved very difficult for them to liase with each other to reduce competition between them. Even in the case of nutmeg no progress in this direction has been made: as long as 1982 an UNCTAD paper on spices stated, 'The two major producers and exporters, Indonesia and Grenada, could cooperate with the eventual objective of aligning their marketing policies for mutual benefit'. All these years later no agreement has been reached. This factor adds to the weakness of the producers' position.

Western customers spend such a small proportion of their income on spice that they do not mind paying 10 times the bulk price provided that they can be assured of high quality.

One way to overcome these problems is for tropical producers to concentrate on supplying to bulk consumers. Bulk consumers in the food industry are more concerned about the price since they buy so much, but they too are very concerned about quality. If, however, they buy in the form of oleoresins or essential oils derived from the spices, tropical producers may be able to sell directly to them. These products do not deteriorate as quickly as spices, they are packed in bulk and they can easily be analysed chemically and for quality and biological impurities.

If bulk buyers can be satisfied that the production process is of a high standard and are able to get certification from independent and respected analysts that the material is at an agreed standard and is available at a competitive price, then they may well be prepared to buy the product from a tropical producer rather than through a large spice trading company.

In recent years the Indians, especially have managed to build a significant export business in spice oleoresins and this is likely to grow. Perhaps, over time and after the building of a reputation for the supply of high-quality products and inspection services, this business will extend to a healthy trade in spices themselves.

Direct selling certainly makes sense in economic terms. The services of western-based merchants and grinders do not come cheap. In these days of instant communication such work could be done at a much lower cost in the country of origin. It is perhaps interesting to note that very large industrial buyers of spices are increasingly buying their supplies on long-term contracts from very large importers who specialise in this bulk trade and buy their supplies directly from the growers. The smaller buyers take their supplies from small trading companies who tend to keep less in terms of stocks but who can be relied on to supply at very short notice.

Many supermarket chains work on a service contract basis with specialist packers and wholesalers who visit each branch regularly and fill up the spice racks with their own brand of bottled or packaged spices.

Another important factor in the international spice market has been the recent acceleration in the globalisation of tastes in food. Almost every town in the United States has a restaurant selling Mexican food. Almost every town in Britain has a Chinese and Indian restaurant. In most modern cities it is possible to eat every main cuisine of the world. Supermarkets are stocked with all the world's most famous dishes in ranges of packaged convenience foods. A high proportion of people in Western countries regularly cook curries and oriental dishes at home.

The taste for these more exotic dishes has greatly increased the use of spices. Unfortunately this has had no effect on spice prices. Over the last few decades' average prices have actually fallen. Only in 1995 have some prices started to rise, but most experts believe that this improvement is unlikely to last.

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