Farmers have reported early buyer enquiry this season, at prices 10% to 15% higher than at the end of last season.
Deer Industry New Zealand (DINZ) Asia market manager Rhys Griffiths said last season's drop in prices was due to weaker buyer confidence as a result of regulatory changes in China, the largest market for NZ deer velvet exports after South Korea.
This led to buyers holding off on making purchases, but many flooded in at the last minute, meaning that total exports did continue to increase.
In fact, Griffiths told NutraIngredients-Asia: "Export value to China over the past year actually doubled, from about NZ$20m to just under NZ$40m."
Prior to the regulatory changes, NZ velvet had been imported as an agricultural by-product. However, the changes meant it had to be imported as a pharmaceutical product in order to make regulatory approval easier.
To meet growing demand, NZ velvet production will increase to 675 tonnes this season, according to DINZ estimates.
East Asian evolution
South Korea is the dominant market for NZ velvet, accounting for 60% of all NZ velvet exports. The country has a long history of using NZ velvet in its health foods and supplements and has become an "advanced, sophisticated" market, moving from producing mostly traditional products to supplements in convenient formats like capsules.
Made from deer antlers, deer velvet is said to enhance strength and endurance, improve immunity, counter the effects of stress, and promote quick recovery from illness.
Griffiths said the NZ deer velvet industry has now turned its attention to China, where its major goal is to develop a market for velvet-based Healthy Functional Foods (HFF).
"China is a few years behind (South Korea) in its industry evolution; deer velvet is still consumed mainly as a traditional product, and some of the processes and equipment there need upgrading.
"The market has the potential to be huge. Chinese HFF companies are strong and in some cases, bigger than their Korean health food counterparts.
"They have held off from developing velvet-based HFFs because of regulatory barriers. These have been largely resolved, so we are very optimistic."
Additionally, Korean and Chinese consumers have a cultural connection to velvet, driving DINZ’s strategy of meeting and building demand among them.
Moving into other markets
Beyond China and South Korea, Griffiths said Taiwan is the "next big market of interest", thanks to greater overall affluence and Taiwanese consumers' generally open attitude towards TCM; in the same vein, he added Vietnam to the list.
He explained: "Deer velvet was previously considered a premium ingredient, but growing wealth in countries like Taiwan and Vietnam — whose economy is also expanding — has made it more accessible."
Another market the NZ deer velvet industry has its eye on is Japan, which Griffiths described as "high-level and sophisticated", and where velvet-based ready-to-consume drinks have considerable potential.
He said increasing demand meant larger supplement and health food manufacturers were entering the market, with some using the NZ velvet quality mark on their packaging and in their advertising.
Blessing in disguise
While it was Chinese regulatory changes that pushed prices down last season, Griffiths said that in the long run and bigger picture, they will have a positive effect on NZ velvet.
"The way we produce velvet now is under even tighter regulations, and we’ve raised our production standards."
He said the price recovery was well-timed, as many farmers in New Zealand have upgraded their velvet production facilities.
This would in turn enable DINZ to connect manufacturers with reliable suppliers, as well as provide them with promotional support, he added.