[This post was first published in the Fairfax NZ Sunday Star Times on 20 April 2014 under the title ‘Developing a deer niche’. ]
Several weeks back I wrote about how the venison industry was at the crossroads. [Venison at the crossroads] The industry has been drifting backwards because farm gate prices relative to the costs make it more attractive for farmers to pursue other endeavours.
In that article I wrote how the potential for on-farm productivity gains with deer is limited by the fundamental biology of the species. Accordingly, the future of venison depends on increasing price premiums which, in recent years, have become eroded. However, in that previous article, for time and space reasons, I left the debate at that point. Here, I address the strategies that have potential to make a difference.
Until now it has always been the European market that has underpinned New Zealand venison prices, with more than 80% of our venison sold there. The market channels developed in the 1980s alongside those already in place to handle the wild-shot trade. Even now, most European consumers do not understand that they are eating farm-raised venison in their ragout rather than wild-shot game.
This European game meat trade is highly competitive and there is a range of competing products. This makes the market price sensitive, and it would be very challenging for New Zealand to create a long term premium niche.
Broadly speaking, our marketers have understood this reality, and hence have treated Europe as a mature market. So the marketers have focused on maintaining the relationships that underpin an ongoing commodity market, but for premium branded product they have looked elsewhere.
For more than 20 years the perceived ‘rising star’ has been the USA and a product sensibly branded as ‘Cervena’. This distinct branding was considered necessary given that the term ‘venison’ is widely associated in the USA with inferior product from wild-shot whitetail deer.
The chilled product from New Zealand has indeed been a superb product, but the market has never really taken off. Currently, the market is about 2000 tonnes of chilled product per year, mainly of the higher priced cuts, with the remainder of each carcass shipped as frozen product to Europe. The successes have been sufficient to make for good stories in trade and industry magazines, and to pay for a range of market consultants, but not enough to sustain a vibrant on-farm industry.
The marketing of any product in the United States has to be based on the understanding that the United States comprises many different markets. Marketers have to focus on particular niches related to location and socio-economics. The effort must be targeted, and within each niche any competition between marketers will be destructive. As America now emerges from recession, there will be new opportunities, but everything will be hard earned.
So if New Zealand’s venison industry is to really climb to new heights, it has to find new markets where premiums can be both captured and retained. Those markets have to be in Asia.
Unfortunately Japan is not promising. The lean New Zealand venison does not readily fit within Japanese cuisine, and the Japanese are conservative towards new foods. Also, Japan now has a shrinking population and economic growth is at best muted.
Fortunately, there is another Asian country where there is great opportunity. Yes, it is China. It will not be an easy market to develop, but the potential is great. As we should all know by now, China continues to lead world economic growth. Percentage growth rates are now less than in the past, but absolute growth rates are what it is all about. Also, there is an ongoing shift in China from investment to consumption, and the Chinese are very open to trying new foods.
Unlike milk powder, sheep meat and beef, our venison will not sell itself in China. It will need a long term approach aimed at both consumers and the food service industry. It would fit very nicely within the ‘NZInc’ approach that I advocated last week. [China, food and NZInc] The focus would be on diced products and an associated education program aimed at both cooking methods and health benefits. A starting place could be introducing Chinese tourists here in New Zealand to the joy of venison accompanied by a glass of Pinot Noir.
There will also be more work needed to get the deer slaughter premises approved by the Chinese. This should be manageable. My reading of the NZ China Free Trade Agreement is that venison fits within the category ’not elsewhere specified’ and hence should now have a zero tariff. There is no country in a position to take away the venison market that New Zealand would develop, and even if there were, then by my reading of the rules they would face a tariff of 23%.
So will it happen? I think market access issues will be sorted out, but beyond that I am not confident. The venison industry does not itself have the development funds it needs, and the overall commitment of the New Zealand Government to the needs and not just the rhetoric of an integrated ‘NZInc’ approach is not in place.