Velvet Market Update 2016 Conference Proud Partnerships 18/05/2016 Presented by Rhys Griffiths
Outline of Velvet Presentation 1. Review of the season How did we go/key factors 2. Current risks What to be mindful of 3. Opportunities Exporter Panel
Review of the season
Another successful season Prices held seventh year of stability Huge improvements to market access Significant strides with market positioning NZ velvet in healthy foods sector strengthens
A little bit of luck >15% devaluation
Exchange rate Helped downward pressure
China s crackdown China s crackdown on excessive gift giving
China McKinsey Report, April: The number of Chinese urban households with earnings of at least $25,200 annually is expected to soar from 4% in 2010 to 54% by 2030
Market Access - Korea 1. Free Trade Agreement implemented Two cuts over the season Provides a competitive advantage 20% reducing tariff over 15 years Now at 17.3% NZ processed velvet direct to Korea 2. Individual Consumption Tax (SET) 10.1% eliminated over the season
Last season Hard work
Risks 3 key risks
3 Key Ris ks 1. Supply side risks Over production 2. Market concentration Commodity traders 3. Increasing regulatory hurdles trade barriers
700.00 $140.00 600.00 $120.00 500.00 $100.00 400.00 $80.00 300.00 Production $60.00 Price 200.00 $40.00 100.00 $20.00 - $0.00 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15E 1. Supply Side Risks Demand/ Supply Balance?
Global demand and supply We know: consumption is growing But: How fast is production growing? Production 1425 NZ 570 China 500 Altai 175 Others 180 Consumption 1425 Korea 600 China 575 Others 200 Taiwan 50
2. Commodity Traders Heavy reliance (>50%) on single sector
Traders 1. Some profit from volatility Opposite direction from industry goals 2. Demonstrate desire to drop prices Last two years Inconsistent with market messages Exporters worked hard to combat this 3. Some want long term value Need to choose partners wisely
3. Regulatory Hurdles Typical with APEC markets
Regulatory Hurdles Many different hurdles regularly raised Increased food safety focus More expected from Asian countries
NZ s Reputation Freedom from many diseases Strong regulatory compliance But could still get caught up with regulatory barriers DINZ must maintain close relationship with regulators (MPI and MFAT) Voice of NZ deer industry
3 key risks 1. Is consumption growth keeping pace with production growth? 2. Despite economic indicators traders can drop price if commercially sensible Price takers? 3. Potential regulatory hurdles need to be closely monitored by DINZ
Opportunities Creating and maximising opportunities
Create Opportunities Improve Market Access Including clear regulatory pathways To proudly promote NZ velvet NZ provenance a key selling point
Market Regulation - China Follow Korean healthy food ingredient channel Hurdles for imported NZ velvet to be used as a food ingredient Understand regulatory pathway Better position NZ velvet in China to maximise long term value
Market Regulation - China Velvet as a healthy food ingredient Agri by-product to food if recognised by C-P DINZ/exporter tested and approved sample Chinese lab agrees: NZ velvet 100% Interested companies
Market Development & Premium Positioning Can only happen by through close key relationships with people in the market Ties in nicely to the theme of this years Conference
Proud Partnerships Traditional (OMD) Sector Healthy Food Sector
New generation OMD marketers Value added focussed Innovative
New generation OMD marketers Quality driven Presented by
New generation OMD marketers Promoting NZ Presented by
Promoting NZness
Selling NZ Positively infectious! Presented by
Healthy Food Sector Our partners using more NZ velvet Promoting NZ velvet Keen on product integrity
Healthy food coys -
Promoting NZness One company went from 8 to 27 tonnes last year
Product integrity NZ velvet brand strength increases Protect integrity to grow brand Requested by customers Country of origin programmes becoming increasingly popular (Asia)
Country of Origin Country of Origin Promotion Product integrity a priority Proof of concept last season.
Country of Origin 1. Provides the ability to audit the supply chain 2. Encouraging direct connection 3. Encouraging pride in selling NZ velvet Implies value
Country of Origin 1. Promotional trial continues in Korea New partners 2. Plan to roll out to China once perfected
Markets and industry finely balanced Risks Opportunities
Bright future Thanks
New Zealand Velvet