Well, this has been a hectic month!

Vanilla is so slow growing; it is frustrating to look at it daily.  But when you visit a plantation after a longer period, it is exciting!  After the rains, all the vines are doing well.  We are experimenting with using longer vines to plant, rather than cuttings.  This cuts the growing time by a good year, but of course we don’t get so many vines.

We have repaired the damage caused by the rains last year and constantly learning new lessons from the vanilla to improve our crops.

We have planted 25 eucalyptus trees as a trial shade tree, which is interesting because you make an essential oil from these trees which is of high value.  And the method of cultivation, pollarding at 2m and harvesting the branches that come from it, make it a perfect accompaniment to vanilla.

Most of my other trials don’t work out, but I am excited by the Amazonian butternut, because it is a prolific fruit provider and the nuts are delicious.  Nobody sells them, probably because the outer skin goes red and soft.  It is delicious, but you cannot pack it for sale.  We are testing to see how they do if harvested early and ripened in the shop.

We are really pleased by our processing.  From suitable, ripe beans, we are getting a much greater return than forecast with very few low-grade beans.  We are separating into these grades:

Red 15 and 20.

Black 15, 18, 20 and 22.

The amount falling out of these grades is negligible, and we are also not getting much red.  This is a euphemism for the vanilla not being as black as we would like.

Grade A Gourmet vanilla is over 15 cm long.  Our extra 3 grades are really something to get excited about.

We have discovered that contrary to perceived wisdom, the vanilla continues to improve for months, the vanillin content rising as long as it has access to oxygen.  Accordingly, we are looking at packaging that allows oxygen to enter and staying away from vacuum packing as is the norm.  We are looking for artisans who can produce beautifully jointed boxes, no nails, from wood.   These will contain our top grade and enhance the price.

You may have seen in the news and been concerned about the price of vanilla, which has apparently crashed.  This is only part of the story…

Madagascar has been controlling the price recently, but the government has intervened.  They have set this year’s price at USD260.  But Madagascar has 1,000 tons of unsold vanilla…  Now, Madagascar has introduced technology into the processing and curing of beans.  The low quality and small beans, previously hard to cure effectively, they are cutting into 5cm lengths and curing in ovens.  There was great excitement about this new way to get cheap vanilla.  Of the unsold vanilla, I understand that 800 tons is cut grade… the rest is red.  The black sells, no problem.

I suspect that the American appetite for extraction grade vanilla has slowed, for two reasons.  One is that buyers are telling us that this grade is showing lower vanilla content recently, and the other is the ban on Ethylene oxide in Europe, which would imply that the sales of American extract is weakening.  Please understand, this is supposition.

Price and demand for gourmet vanilla in Europe remains strong.  I don’t have an up to date price, but in Japan it is currently USD250 per kilo.  I would expect it to be the same.  We start to sell vanilla this month, and our grade A is selling at Rp 2,500,000 at the lowest, to Rp 5,000,000 at the highest. As we have two grades above this, we are wondering what we can sell it for.  Currently at least 20% of our harvest is over 22cm long, huge, beautiful vanilla.  It is still maturing and we are waiting for it to crystalize.  I suspect we shall need Zak to simply see how much he can get for it.  Top salesmen can find out very quickly and usually get double the price I would attempt.

Others

Lobsters are doing ok.  We have arrested the deaths and are about to start expansion.  We cannot fulfil the current demand, but we need an outlet.

So, we are turning the office villa into The Royal Spice Café.

This will offer local food cooked in a novel manner, as well as lobsters!  It will be only open for breakfast and lunch at first. I trust that you will be regular visitors!

This café is a tangible CSR, for it employs more skilled local people and it needs amenities.  We offer road running in peace and without fumes, with a shower and pool afterwards.  We offer trekking, and we are creating a local bird and wildlife reserve.  We shall set up bird tables and hides for those wishing to photograph unusual birds, and this will require the employment of local people with wilderness skills to look after the reserve and keep the trekking paths open.  We shall also offer the local people an outlet to sell their produce, organic of course.

An immediate direct benefit of the café is that it will bring more potential investors to view the vanilla gardens and provide a comfortable discussion place.

Another new venture is Royal Butterfly Gardens.  We plant a garden in a hotel with butterfly food plants.  This automatically brings wild butterflies, but in addition, each week we supply the garden with 16 varieties of beautiful Balinese butterflies.  Butterflies only live for a week.  The butterflies are bred separately.  In addition, the hotel must stop fogging.  If they need to remove mosquitoes, we can supply an egg case of Indian Flower mantis.  The babies soon hatch and will eat every mosquito over a 500 square metre area.  The only issue here is that our current supply is less than 20 egg cases per year, so we are increasing our capacity as fast as possible.

The profit comes from installing and planting the garden and from supplying the butterflies each week.

We are currently running a trial garden with one hotel and establishing the design of the gardens.  We have three more locations who have expressed interest, without us doing more than mentioning it to a couple of people.  We want the trial complete first of all.  This is not capable of enormous expansion at speed, as we will have to increase the supply of butterflies.  We have one of Indonesia’s top experts running the program.

Investment

We grow increasingly frustrated with the large investor, who four months or even five down the line has done nothing.  We do understand that large investment takes time.  We have opened our books; we are transparent in everything we do.  We have now completed due diligence, which we do not normally do for investors, but this was taking time.   The results are not encouraging, and it would seem the company is using investing in us as a way to raise money for themselves.  Nevertheless, we shall leave the door open for the time being.  Perhaps they will be successful.  Indeed, they have just indicated there will be a major investment in us after the 11^th of this month.

Fortunately, we do not rely on one single investment and we are motoring along in other cases.  Zak Edmonds, having taken December off to visit the UK, has returned strongly as you see below.

The very fact that we are now producing not just vanilla, but beautiful high-grade vanilla, is encouraging new investors.  We are planning two fund raising events in Bali, the first on February 22^nd at Aria restaurant in Seminyak, for the Entrepreneurs Club.  You have to be a millionaire to be a member.  We expect the café to supply new investors and we have been given a sales office by a legal firm who represents the next President.  Zak will be staffing this with two assistants, not just to sell investment but also to sell vanilla and other products such as the Butterfly Gardens.

January investment banked was Rp 161,064,212.86 due to currency fluctuations and a communication mix up. Still payment coming in.  Share price is currently Rp 2 million per share, expected to hit Rp 2,500,000 in the near future.  Zak has asked me to tell Shareholders about the referral scheme available to you, if you are interested,  please email him on zak@royalspicegardens.com

Rex Sumner