Wednesday, April 24, 2024

Velvet industry happy with recent progress

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Cautious optimism seems to be central to views on the future of the velvet industry in New Zealand at the recent deer industry conference in Wellington.
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With deer velvet notoriously boom and bust, industry participants were pleased with four consecutive years of consistent returns.

“We’ve come a long way over the last five years. We’re experiencing a more co-ordinated and more considered approach to the market by the few remaining exporters,” Deer Industry New Zealand velvet marketing services manager Rhys Griffiths said.

“But we still have some resonance of a commodity- or trading-type mentality.”

Griffiths said velvet producers were well served, with a mix of selling options ranging from well-respected independent buyers to a co-operative marketing company to a larger-scale commercial agribusiness.

Producers were gently reminded of the potential dangers of short-term price-seeking behaviour involving the sale of velvet.

“Unlike the established buyers, these opportunistic-type traders have no long-term investment in the industry, no long-term ownership,” Griffiths said.

“Without loyalty the few remaining long-term participants will struggle to invest in the time and distribution channels to improve our brand position.

EVOLVING INDUSTRY: The velvet industry is experiencing a more co-ordinated and more considered approach to the market by the few remaining exporters, Rhys Griffiths says.

“Producers, buyers, exporters, marketers need to take a partnership approach, ensuring ongoing supply at profitable levels that add value throughout the supply chain.”

PGG Wrightson national velvet manager Tony Cochrane painted a picture of industry development when he contrasted the velvet industry in 2002 with that of today.

In 2002, NZ was producing 520 tonnes of velvet. About 75% of that went into a pooled system, where it was sold to other exporters or to one of the 15 local processors on a weekly basis.

This season 470t of velvet was sold through contracts and private sales – pools no longer exist. Only four local processors still operate at a reasonable scale. Most velvet is sold through five main NZ-based sellers.

Markets for deer velvet were evolving and this was reflected in velvet pricing, Cochrane said.

South Korea remains the largest destination for NZ velvet, accounting for 60-65% of total consumption but it imports less than half of that directly. More than two-thirds of NZ’s velvet production is exported to China.

Cochrane said this change had resulted in a change in pricing points for velvet grades. In 2002, Super A and re-growth averaged $130/kg and $85/kg respectively, while last season the average prices were $100/kg and $110/kg respectively.

Consumption patterns are also changing.

Demand from the traditionally strong oriental medicine sector is in decline. However, there is a growing opportunity in the functional food niche.

Griffiths identified the healthy, or functional food type of product as a future growth prospect, potentially enabling the differentiation of NZ velvet from other velvet sources to capture further value.

“In South Korea we know they are changing their consumption habits. It comes down to an ease of access of on-the-go formulations rather than having to spend heaps of money and time going to see an oriental medicine doctor,” he said.

“It will enable us to get a closer connection to the consumer and promote NZ velvet’s key brand messages, to tell that NZ story.”

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