Despite challenges from competing land use and a drop in the national deer herd, the industry is well positioned to fulfil New Zealand’s goal to provide high quality protein products to the world’s best-heeled consumers.
Deer Industry NZ (DINZ) Asia market manager Rhys Griffiths says the price recovery is timely.
“Regulatory changes in China last season led to a loss of buyer confidence and a dip in prices that did not reflect the steady growth in demand for NZ velvet from China and Korea, our major markets,” he says.
“Indeed, overall demand was such that some buyers who held off making their purchases in the belief that prices would fall further nearly missed out on supply. Lesson learned. Korean and Chinese companies are now actively buying to ensure they get the velvet they need.”
Griffiths says DINZ estimates production will reach 675 tonnes this season, up slightly on last season.
“This increase will be needed to meet growing demand for velvet as an ingredient in health foods in Korea, which we estimate accounts for 150 tonnes of velvet a year.
“Health food products are bringing in new consumers; it’s not just a case of velvet consumers moving from a traditional to a more modern form of product.
“The growing consumer demand is also attracting more large manufacturers, all seeking NZ velvet for new health food products of their own. Some are also using our NZ velvet quality mark prominently on their packaging and in mass media advertising.”
He says an important industry goal is to encourage the development of a market for NZ velvet-based healthy functional food (HFF) products in China.
“The market has the potential to be huge. Chinese HFF companies are strong and in some cases bigger than their Korean health food counterparts. To date they have held off from developing velvet-based HFFs because of regulatory barriers. These have been largely resolved, so we are optimistic.”
In the meantime, South Korea remains the dominant market with about 60% of all NZ velvet consumed there. Some of this is velvet bought frozen from NZ, processed in China and re-exported to Korea.
“As last season’s market dip showed, potential regulatory changes are an ever-present risk for the NZ industry,” Griffiths says. “There is also the geopolitical risk. War on the Korean peninsula would clearly have an immediate and significant impact.”
These risks aside, the use of velvet in Korea and China is culturally ingrained. Also the enthusiastic consumer response to new velvet-based products bodes well for future demand.
For this reason, DINZ does not see a need to make major changes to its market development strategy, which is to build demand among consumers who have a cultural connection to velvet.
“We are seeing growth in enquiry from South East Asian countries where there is a deep respect for traditional Chinese medicine (TCM), and velvet’s role within it. Vietnam, for example, has a population of 100 million, a rapidly growing economy and a firm understanding of TCM. Taiwan and Japan also hold potential that DINZ will be exploring,” Griffiths says.
“The path to success for the NZ industry comes from working with businesses in the marketplace that see an opportunity for velvet-based products. We can help them find suppliers of quality assured NZ velvet, explain the benefits of NZ velvet and provide them with promotional support.
“One Korean health food company is alone spending millions of dollars on the promotion of its products based on NZ velvet.”