The Flavor of Hope

February 10, 2010 by Susan Sills

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It could be a slice of paradise – the hot Ugandan sun beating down on lush soil, a riotous sprawl of flowers and shrubs, the whirring of the cicadas. But it’s not. Where once vanilla plantations flourished is now abandoned farmland. Only a handful of playing children add life to an otherwise bleak scene.

Bleak, too, is the status of current vanilla prices.  “We’re at the absolute bottom price-wise,” says David van der Walde, director and CEO of Montreal-based Aust & Hachmann Canada Ltd, a part of the world’s largest vanilla importer and distributor. The vanilla market crashed in 2003, he remembers, and hasn’t come back yet. Since then vanilla has been traded at such ludicrously low prices that farmers in countries like Uganda have abandoned their crops. “Vanilla is a commodity that swings in price,” notes van der Walde. “And because there is no exchange to protect you against fluctuations and prices, you have to speculate. You have to make judgment calls based on instinct.”

 

Keeping a grip on inventory

But since the company’s acquisition of SAP Business One, a business management application built specifically for small companies, van der Walde does not feel so alone with his decisions and speculations. The software supports him in inventory control, previously a nightmare for the small but globally active company. A huge challenge in his work, says van der Walde, is monitoring the market – and it cannot be done without a firm and accurate grip on company inventory. It’s not enough to deal with averages, he emphasizes. “When you’re dealing with hundreds of lots, each one at a slightly different price, and then suddenly you’re called to quote on a certain amount of tonnage, you need instant information: How low can I go at any given time? How high can I go?”

Vanille

For van der Walde, the software solution has proven to be his right-hand man. It keeps company  inventory up to date in terms of average cost overall within a specific lot. This is a complex process, he explains, because “we have a huge vanilla inventory, some we keep in stock for years. It’s not just 250 tons of vanilla, it’s 250,000 kilos – 800 kilos here, 2,000 kilos here, a thousand kilos here.” And within all of those lots, there could be 15 different grades, and within those grades, there are four different origins. Depending on the origin, the company buys in U.S. dollars or euros. All the figures have to be kept independently accurate. “The other system we had prior to SAP Business One was a custom-developed solution. It couldn’t do that,” says van der Walde and shakes his head. “For the life of it, there was no way.”

Now life is easier for the impassioned vanilla marketer. SAP Business One gives him in a single report the information he needs to make informed decisions: stock levels, amounts of vanilla in transit or being processed, and average cost per kilo. He particularly appreciates how much the solution enables him to deal with multiple currencies: “A lot of software applications just offer a U.S./Canadian convertibility function, but nothing else. SAP allows you to formulate whatever conversions you want.” This is an important feature for a company that is intending to expand and perhaps deal with new vanilla bean exporting countries.

Even now Aust & Hachmann has seven inventory locations in four countries, an impressive development for a small company that started as an agent for Aust & Hachmann in Hamburg, Germany. “At the beginning, I’d send an order to Hamburg, they’d deliver to the client and that would be it,” recalls van der Walde.  “Now we import from numerous countries and make our own extracts. We have to send them inventory on their premises to convert it to extract – and so have to keep track of the inventory on their premises, too.” Here, too, the company can rely on its SAP software to manage the various locations seamlessly.

 

Saving time by tracking sales

Mina Fargnoli,  responsible for accounting and inventory control, works with SAP Business One on a daily business. “The SAP system is much better than the one we had before. It runs great and is a fun system to have and work with.” She remembers her work prior to SAP Business One: “The accounting was done manually. Whenever the orders would come in, we’d just manually give them a number and then process the orders. With the SAP system, we can keep track of sales and purchase orders from the beginning to the end.” Our accounting processes are a lot more organized, she concludes. “We save a lot of time.”

This frees up the small and dynamic company to concentrate on its goals. Aust & Hachmann is currently dealing in three distinctly different markets – retail, industrial food, and food service. While these markets will remain the same, “our vision is to grow and maintain,” explains van der Walde. “We aim to become increasingly global and multinational, which, of course, will also mean more currencies and more origins.” The CEO sees a lot of growth potential in retail growth, which could involve, for example, using universal product codes to identify and warehouse their products. “Maybe one day I’m going to decide I want to fill the glass tubes in Montreal and not in Germany because my volume can sustain that,” he speculates.  “I know that the SAP software will be able to handle that effectively.”

 

Thriving in a volatile climate

Regardless of future growth, Aust & Hachmann will always remain what it is today: a niche company within a niche product in a niche market. But even with a small number of people on the pay roll, says van der Walde, the company is capable of generating large amounts of revenue.  By responding nimbly and making informed decisions, it should continue to thrive in the current volatile vanilla trade climate. “I’m particularly excited by emerging markets such as China and India,” says van der Walde. “They are potentially massive for the vanilla trade.”

And they could be the silver lining on the cloud hovering over countries like vanilla-exporting countries such as Uganda. Increased vanilla consumption combined with the supply deficit forecast to hit the vanilla market in the next year or two will increase the price of vanilla beans again – making it once more worthwhile for Ugandan farmers to run their plantations and turn the lush soil into green gold.

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