What is Passion2Profit?

What is Passion2Profit?

New Zealand’s five major venison marketing companies, the New Zealand Deer Farmers’ Association and Deer Industry New Zealand (DINZ) have agreed to work together to transform the New Zealand venison industry.
This 7-year programme has been named Passion2Profit (P2P) to reflect the passion of the industry for deer and venison, as well as the need for all involved in the industry to make greater profits. P2P is co-funded by the government’s Primary Growth Partnership (PGP).

P2P is made up of two interlinked projects:

  • Marketing premium venison
  • Market-led production

These projects aim to correct the mismatch between venison production and demand in traditional markets, while progressively developing new markets that demand quality venison at chilled prices all year round.

This graph clearly shows the mismatch between demand for venison from traditional markets, as reflected in the prices paid to farmers, and production

 

 


Why is P2P needed?

  1. The profitability of the New Zealand deer industry needs to improve so it is more competitive with alternative land uses.

  2. The low profitability of venison farming is largely because it remains over-reliant on the commodity game meat market in continental Europe. This market has a narrow window of demand in the northern autumn/early winter when chilled venison cuts have an average value 20-30% greater than the rest of the year.

  3. On-farm, many producers have been unable to produce young venison in the optimum weight range for this market window. As a result, much New Zealand venison is frozen and stored for many months before being traded as an undifferentiated commodity into this market.

  4. In recent years, returns to farmers have declined as a result of subdued consumer demand in Europe, growing competition from other game meats and the weakening Euro. In response, many farmers have converted to more profitable farming options and the national deer herd has fallen from its peak of 1.7 million deer to under 1 million.

  5. Without change, the deer industry will continue to shrink and with it, the ability to fund research, market development and other services needed to ensure its long-term viability. This will be a major loss. Not just for those who are committed to deer farming, but for Brand New Zealand and for those other farmers for whom deer are a potential avenue for diversification.

  6. The changes needed are unlikely to be achieved through a business-as-usual approach with small changes made each year. A game-changing investment is needed to allow many initiatives to be implemented simultaneously – the only way they are likely to be successful. Only with co-funding from the government’s PGP fund is such a strategy possible.

Marketing premium venison

  1. P2P aims to increase the amount of NZ venison sold in chilled form, year round, at higher prices. This will diversify the consumer base for venison, thereby spreading market risk, extend the consumption period and generate greater sales of higher value chilled venison.

  2. The five largest venison marketing companies – Alliance Group, Silver Fern Farms, Duncan and Co, Mountain River Venison and Firstlight Foods – will work together to design a collaborative marketing programme. This will go far beyond the scope of existing promotion programmes for NZ venison. It will involve the development of common brand values and positioning by these companies for their use in new markets and new market niches.

  3. A single set of product and production quality standards will also be developed to underpin the positioning of NZ venison in both developed and developing markets.

  4. Marketers will work together to open new markets where NZ venison will be positioned as a luxury, non-seasonal meat.

  5. The first stage will be to uncover opportunities in new markets such as mainland China. Venison is relatively unknown in Chinese cuisine, but the creation of demand for premium venison products in a country as large as China has the potential to increase year-round demand and reduce reliance on the European game meat market.

  6. The second stage will be to test New Zealand’s ability to position the finest venison as a new, exotic, non-seasonal grilling concept in one or two smaller markets in Europe. The products will be positioned to be distinct from ‘game’ meats.

Market-led production

  1. P2P aims to develop systems to help farmers respond to current and future market demands.

  2. Some leading farmers have successfully integrated the best scientific knowledge on deer feeding, animal health, and genetics into their farm systems. This enables them to profit from delivering deer in the weight range and at the time that the traditional market demands. However the majority of farmers are not deploying these technologies successfully.

  3. P2P will package technologies into solutions that are convenient for farmers to apply. These will then be delivered to farmers in new and innovative ways. Advance Parties[1], which have completed the first year of a three year trial, are one example of how this will work.

  4. To assist in the ‘packaging’ and delivery of solutions, technology will divided into three main categories – feeding, genetics and animal health. A champion and a reference group will be appointed for each.

Other elements will include:

  • Benchmarking: An expert working group of large-scale farmers has been formed as part of Advance Parties to develop productivity benchmarks for commercial farmers. This will allow meaningful comparisons to be made between farms.
  • Expertise development: identifying farm consultants, veterinarians and other specialists with expertise in deer and where necessary filling regional gaps. Special training and accreditation will be explored.
  • Knowledge wholesaling: Much of the science about deer reaches only a minority of highly innovative farmers, farm advisers, veterinarians and other rural professionals. Systems will be set up to enable this knowledge to be better packaged and disseminated to farmers and those who advise them. An annual deer research conference is likely to be initiated.
  • Tailored farmer communications: Individual farmers will be provided with information that is relevant to the performance of their operation. For example, how their farm performs relative to peers in average slaughter date or average carcase weight.

What will it cost?

  1. P2P will cost $16 million over seven years. Of this, half will be funded by the government’s Primary Growth Partnership (PGP) and half will be funded by the deer industry, using funds derived from producer and exporter levies.

  2. P2P expenditure will fall into six subprojects:

Marketing premium venison: $8.2 million over 7 years

a. Confirming market requirements: $1 m over years one and two

b. Collaborative marketing: trialling and establishing distribution via: $5.1 m over 7 years  

c. Developing and applying industry standards: $1.6 m over 7 years

Market-led production: $7.8 million over 7 years

d. Overall project management: $0.8 million over 7 years

e. Accelerating industry change through the development and deployment of new farmer engagement strategies such as Advance Parties: $4.1 m over 7 years

f. Packaging of the best information on genetics, feeding and deer health technology to create on-farm solutions: $2.9 m over 7 years.


The expected benefits

The P2P programme will benefit deer farmers, marketers, customers, the wider farming industry, the economy and the New Zealand brand.

 

Venison farmers

Industry bodies

Processors / marketers

Customers / market

New Zealand

Improved and less volatile profitability

                   

                   

 

 

Improved environmental sustainability

                   

Increased returns flow to suppliers, rural communities and the New Zealand economy

 

 

 

 

Template for collaboration

                   

                   

 

 

Enhancing the value of New Zealand’s brand

 

 

                   

 

Optimised land use

                   

 

 

 

                   

A new practice change model for the primary sector

 

                    

 

                   

Diversified agricultural portfolio

 

 

 

 

                   

DINZ estimates that P2P will increase export revenue by $56 million and net industry earnings by $34 m a year. Year 7 revenues will be $75 m higher than they would have been under a ‘do-nothing’ scenario, in which the industry continues to shrink. These figures assume that the farmers of 50% of the national deer herd adopt new practices and that new markets for venison have been created by year 7.

These benefits will result from:

In the market

Selling a larger volume of venison and getting higher average prices for it:

  • Because more prime animals will be produced in time for peak spring demand from the traditional market, chilled venison exports in the European game season will increase from $32 m to $52 m a year
  • Non-seasonal exports of chilled venison, catering for new demand from alternative markets, will increase from $25 to $35 m a year
  • An increase in total venison output will increase frozen venison revenues by $26 million a year.

On the farm

By increasing revenue growth (as above) and making the following on-farm efficiency improvements:

  • Survival to sale rates will increase to 76%, from the industry average of 72%
  • Growth rates and carcase size at slaughter will increase by 4 kg by year 7, resulting in a 6% feed saving of per kg venison produced. The average age at slaughter will reduce by 8%, making more deer available during the chilled season.
  • Processing efficiency will increase by 7% per kg of venison, as a result of heavier average carcase weights
  • The average value of a deer carcase will increase by 1%, as a result of increasing loin and leg muscle yield

All benefits of P2P will flow to New Zealand farmers, venison processing and marketing company staff and shareholders (the majority of whom are farmers).

These benefits will continue after the PGP programme has finished. Genetic improvements will be permanent, as will higher market returns due to new demand and increased collaboration between farmers and their marketing companies.

The Net Present Value (NPV) of P2P (benefits less costs) to the deer industry EBIT over 20 years is $520 million assuming a maximum of 50% adoption and ongoing costs beyond year 7 of 50% of P2P levels.

How will P2P operate?

P2P will be governed by a Programme Steering Group (PSG) made up of a representative from MPI, two from DINZ, two from the venison marketing companies, one from NZDFA and an independent chair.

The steering group will:

  • Provide programme governance and decision making
  • Provide strategic insight
  • Ensure the programme aligns to industry and individual co-investor needs and expectations
  • Manage risks.

A P2P programme manager will be appointed by DINZ in consultation with the PSG. The programme manager will report to the PSG and be responsible for the day-to-day management of the programme.

 
The PSG will be supported by two working groups:

  1. Marketing working group
    Composed of a representative from each of the marketing co-investors (Alliance Group, Silver Fern Farms, Firstlight Foods, Mountain River Venison and Duncan & Co) as well as the P2P programme manager.
  2. Production working group
    Composed of industry participants who have expertise in relevant fields (including genetics, animal health, feeding, information systems and Advance Parties) as well as the P2P programme manager.

[1] A 3-year trial of Advance Parties 2014-2016 is being co-funded by DINZ and the MPI Sustainable Farming Fund