Velvet looks promising in a turbulent world

Velvet looks promising in a turbulent world

Wednesday, July 22, 2020

The deer farming industry is feeling okay about the prospects for deer velvet sales in Asia in the wake of the Covid-19 pandemic. While it doesn’t rule out some continuing market disruption during the 2020-21 season, which begins in October, long-term demand in Asia for natural health food ingredients like velvet looks relatively stable.

“During the peak of the pandemic in China and South Korea, velvet-based products enjoyed reasonable demand through on-line and home shopping channels because of their perceived immune-support functions. Health-related food products from New Zealand were in particular demand,” said Deer Industry NZ (DINZ) marketing manager Rhys Griffiths.

Speaking at the 2020 Deer Industry Conference – an on-line event held on three successive Tuesdays in late June/early July – Griffiths said velvet production in the 2019/2020 season will be up slightly from 803 tonnes the season before. The farmgate value of velvet remains at more than $100 million for a second year running.

“Our largest exporters report that pretty much all their stocks have been sold. Prices were back a bit due to supply chain disruptions, rather than any issues with consumption. In fact, several more branded products based on NZ velvet have been launched in South Korea this year, despite the pandemic,” Griffiths said.

“So the picture is positive. We have a healthy and growing velvet industry that, over the last eight years has nearly doubled its volume and more than trebled in its value. At the same time, we need to mindful about growing too fast.”

Most of the season’s production had been shipped to markets in Asia before they went into lock-down. This meant velvet was less impacted by Covid-19 than other product groups, but it didn’t escape entirely.

Photo caption: One of the new velvet products launched this year in South Korea

“Just under a third of NZ velvet is processed in China and re-exported to Korea – and this supply chain was affected. There was also significant disruption to airfreight. Passenger aircraft account for a lot of freight – and with the decimation of air services, the cost of airfreight went up.

“Sales of velvet products through brick and mortar stores were impacted, as you’d imagine with no foot traffic. Sales through Oriental medicine doctors also suffered as elderly patients stayed away from clinics for fear of coming into contact with Covid-19.”

Griffiths said sales through stores and clinics have since rebounded somewhat in those cities in Korea and China where Covid-19 is under better control. Also, early indications are that the core markets of China, South Korea and Taiwan might come out of the pandemic better than many western countries where the pandemic has not been effectively controlled.

Looking ahead, he initially had some concerns of a reduction in demand resulting from the economic impact of Covid-19 on consumer spending power. However this may be offset by demand from consumers who use NZ velvet for its perceived immune support properties.

“Immune support is a good space to be in right now. Underlying demand for NZ velvet in both Korea and China is strong. And there is increasing interest from other parts of Asia that we are investigating,” Griffiths said.

“Also, the way New Zealand has managed the pandemic has gained us real kudos on the world stage. Don’t underestimate the impact this might have in terms of demand for our products.”

He said there is a strong perception in Asia that New Zealand is a clean, green country with a professional farming industry, with strict product hygiene and animal welfare standards, overseen by government officials. These attributes, along with the physical quality of the antler itself, mean that NZ velvet often earns a premium in Korea over velvet from other countries.

To further reinforce this positioning, DINZ chief executive Innes Moffat told the conference that a paddock-to-processor traceability system, VelTrak, will be introduced next year.

“With more and more marketing companies displaying the NZ origin of their velvet ingredient, Veltrak will give them a way to guarantee the provenance of every stick they buy. This will help protect the value of the NZ velvet brand and help protect the investment deer farmers have made in their velvet production and quality assurance systems,” Moffat said.