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Rural Industries Research & Development Corporation
Summary of full report
by Chris Tuckwell
Rural Industry Developments
June 2001
RIRDC Publication No 01/085
RIRDC Project No BII-1A
Executive Summary
General
Australian deer farmers have long been envious of the apparently greater average return that New Zealand’s deer farmers have realised for animals sold for venison processing. A proportion (not all) of that greater return is explained by differences (lower) in value of the New Zealand dollar compared to the Australian dollar
There are many other factors that have contributed to the difference in returns, but one of the major factors is the, well documented, income that the New Zealand industry has earned from it ability to profitably process and market the co products of venison processing
One of the major reasons for the consistently greater returns realised by New Zealand farmers from animals sold for slaughter is that New Zealand marketers have created ongoing, profitable demand for co products collected during animal processing. In the past, the many processors of Australian deer have been unable to separately market their small volumes of co products
Generally speaking the lack of cooperation between the processors meant that there was an inability to pool co products to attract market interest so much of the co products were wasted or sold opportunistically The recent rationalisation of the deer processing industry has meant that fewer processors have access to volumes of co products that are commercially saleable. Improvement in the value of co products sourced from red deer and the creation of value for co products available from fallow and rusa deer will significantly improve returns to Australian deer farmers
Although the estimated retail value of New Zealand sales and estimated potential value of Australian sales to specified tourist markets is significant, many farmers will look at the retail values for value added velvet and venison co products and mistakenly expect an extra purchase premium from purchasers. However the values assume that: (i) markets are developed and products collected can be sold and (ii) all co products collected from each animal processed are of sufficiently high quality to be processed for the market
To successfully develop apparent market opportunities the Australian Deer Industry must work cooperatively to ensure the regular supply of marketable volumes, high quality product. The cooperative development of these apparent markets can lead to a direct increase (co product premium) in processors payments for livestock from the collection and sale of co products
If the industry segregates and too many individuals or groups (more than 1 or 2) compete in their attempt to influence and service the apparent market, each small group is unlikely to be able to source, process and supply quantities of product that will sustain consumer interest. The lack of interest in sourcing product from a myriad of small suppliers will inevitably lead to fall in demand for Australian products and any co product premiums paid by processors of deer are likely to disappear
Individual New Zealand businesses are already considering opportunities to development Australian inbound tourist markets for value added velvet and venison co products. It is important for the Australian deer industry to begin cooperative development of markets for value added velvet and venison co products immediately and probably in cooperation with New Zealand businesses in an attempt to create supply channels that can meet the potential demand for products and minimise unnecessary trans-Tasman competition
As indicated in the application for project funds, during the period of this project (February 2000), Bilby International began paying small premiums directly to farmers for co products obtained from deer they have purchased as evidenced by purchase receipts
Financial statistical information provided by Bilby International shows that from 17 January 2001 to 24 April 2001 it paid a total in excess of $9,000 to growers as `by product bonuses’
Potential Tourist Demand
Estimates of average consumption of value added velvet antler and venison co products by Asian tourists to New Zealand transposed to estimates of the number of inbound Asian tourists to Australia, suggest that the potential demand for these products could be significant
If the Australian deer industry is able to encourage only 20% of Asian tourists from China, Hong Kong, South Korea, Taiwan and Singapore to purchase a similar volume of velvet and venison co products that are estimated to be purchased by similar tourists visiting New Zealand, returns to industry could be in excess of $60 million (table 20)
However, the potential value of these sales does not include any estimation of marketing costs that are likely to be significant and will require significant investment. If the industry segregates and too many individuals or groups compete in their attempt to influence and service the apparent market, each small group is unlikely to be able to provide the required marketing investment, source, process and supply quantities of product that will sustain consumer interest
The lack of interest in sourcing product from a myriad of small suppliers will inevitably lead to fall in demand for Australian products and any co product premiums paid by processors of deer are likely to disappear
Subsequently retail tourist business that have been introduced to these products will look for suppliers that can consistently provide commercial volumes of quality products and that is likely to mean New Zealand businesses
Potential Pet Demand
Given the massive spending on pet foods by people in Europe, North America and Australia and owners willingness to ensure that animals are properly cared for the market opportunities apparently offered by this sector appear significant
In particular, information that continues to be generated, both anecdotal and scientifically researched, on the value of velvet antler and venison co products in treating animal ailments demonstrate the apparent opportunity to enter and develop these markets for the benefit of animals treated and the commercial expansion of the Australian Deer industry
Marketing investment required to further investigate and develop this opportunity is likely to be significant
Grower Returns
While data in table 18 suggests opportunities to improve grower returns by $0.11, $0.27 and $0.07 per kg hot carcase weight for fallow, red and rusa deer respectively, many farmers will look at the retail values for value added velvet and venison co products and mistakenly expect an extra purchase premium form purchasers. However the values assume that: (i) markets are developed and products collected can be sold and (ii) all co products collected from each animal processed are of sufficiently high quality to be processed for the market
Although potential markets for product have been identified and accessed, not all available products are in demand by current markets
Market development and the payment of premiums to farmers for co products collected assumes, that those involved in market development have the financial capability and the ability to accept risks associated with market development
Market development involves financial risks linked to `up-front’ investment associated with:
• Market assessment
• Employment of appropriately skilled
staff
• Raw product purchase
• Variability in raw product quality
• Processing, packaging, storage and
freight costs
• Aggregation of saleable stocks (consistency
of supply)
• Development of demand
• Development of retail outlets
These `up-front’ investments include considerable risks of investment loss from a range of variables including:
• Loss of initial product (markets
are not developed before initial product passes use by dates)
• Variable supply of raw products
• Variable quality of raw products
• Inappropriate employment of staff
• Production, processing and marketing
cost increase to minimise profit margins
Processing and Packaging
Much is already known about processing and packaging of all products and processing is likely to remain a specialist’s domain. Although factories that process deer antler have idiosyncratic specialisations to produce products that meet client and marketing requirements, the principal processing techniques and objectives are similar, although the actual technique employed by different factories varies considerably
Similarly, packaging requirements within specific market segments are similar although individual clients may have particular requirements. As commercial developments of `new’ markets are investigated (Western Health Food Market and Western Pet Food Markets) ideal processing and packaging requirements must be developed
Therapeutic Drugs Administration (TGA)
The requirement for TGA registration for encapsulated product is not definite although some TGA staff suggest that any encapsulated product is likely to require TGA registration before it is offered for sale
Any individual or company considering the sale of encapsulated deer velvet or venison co products in Australia should seek advice directly from the TGA
It is worthwhile to note that Australian encapsulated products currently available for sale in Australia include deer antler, deer blood, deer liver and sheep placenta from more than one company
The TGA does not provide advice on ANZFA regulatory requirements
Australian and New Zealand Food Authority (ANZFA) Representatives of ANZFA have suggested that non-encapsulated food product that:
(i) conforms to ANZFA regulations,
(ii) is processed in facilities that
adhere to a well documented and maintained Good Manufacturing Practice,
(iii) adheres to a Standard Operating
Procedure and
(iv) does not carry any specific or
inferred health claims, does not need to be registered by the TGA
However market research by this project reveals many products including deer blood, deer liver, deer antler and sheep placenta capsules that do not carry a TGA registration number are currently available to Australian consumers. Most, but not all, of these products do appear to meet ANZFA labelling requirements
The ANZFA does not provide advice on TGA regulations
Current Australian Market Sophistication Our investigation of Australian tourist markets, in particular health food shops and Asian herbalist shops, suggests that this market sector’s knowledge of the Australian deer industry generally and the availability of deer co-products specifically, is almost nonexistent
There are some commercial outlets serviced by Australian companies that have limited knowledge of the Australian industry. However there has been little or no commercial development of these markets and the only promotional material available to retailers is that produced by New Zealand
Product available for sale included material from New Zealand and other countries and sometimes, Australian product
Other information gleaned from visits to retailers and potential retailers of deer co-products are confusing and appear to relate to either the retailer’s clientele or, limited, previous experiences or both
For example some retailers suggested that deer antler powder was difficult to sell while others had the opposite view, some suggested that Asian buyers did not trust the content of encapsulated products while others held an opposing view
Initial interest in Australian product is encouraging however development of a long-term, sustainable market is likely to require significant investment in both marketing programs and production systems that have an ability to guarantee regular supply of consistently high quality products
Quality Assurance Through its Committee for Proprietary Medicinal Products (CPMP), the European Agency for the Evaluation of Medicinal Products – Human Evaluations Unit is encouraging the concept of `Well Monitored Herds’ to minimise risks of transmitting Animal Spongiform Encephalopathy (TSE) agents via medicinal products. They say that although the principal of well-monitored herds is attractive, implementation and policing need more consideration
The attitude of the CPMP reflects the wider community concern about potential risks to human health from products that are used by humans as food, medicinal and other products. The implications for those involved in the production of products like those obtained from velvet antler and venison coproducts are likely to be significant
However well monitored quality assurance accreditation that provides consumers with safeguards required for food safety, animal welfare and animal husbandry issues would help guarantee market access for product. If fact, increasingly, quality assurance accreditation is becoming a minimum standard for market access rather than an extra standard for elite producers
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