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01 December 2000

Lessons for government in deer success

The New Zealand farmed deer industry is now officially 25 years old.

Exports of venison, velvet and co-products now yield more than $ 200 million a year and, at the present rate of growth, could reach $ 1 billion before the decade is out.

In Europe the prospects appear to be practically open-ended. New Zealand production can't keep up with rapidly growing demand.

Affluent consumers are cottoning on to the fact that this naturally-grown, red meat is tender, easy-to-cook and doesn't have the strong gamey flavours they associate with shot wild game. Best of all, it's free of BSE, hormones and all the other nasties they associate with meats produced in the northern hemisphere.

In the United States, where most exporters are united under the Cervena appellation, the growth in demand has been slower, but prices are being maintained at the top end of the white tablecloth restaurant market.

On the other side of the industry, research into the properties of antler velvet is being used to spearhead a carefully planned entry into the US nutriceuticals market - a potential goldmine if ever there was one.

Velvet is whole deer antler. As the only living mammalian tissue which grows and is shed each year, it is a treasure trove of biologically active substances.

Velvet has been in the Chinese and Korean pharmacopoeias for at least 2000 years. In Soviet Russia, pantocrin - a velvet extract - was widely used to help restore patients after surgery and to boost the immune systems of cancer patients after chemo- or radio-therapy.

Every year, the swag of solid scientific evidence backing velvet's extraordinary properties continues to grow. So much so that marketers are advised not to claim too much for their extracts, pills and powders - lest they be seen as low-credibility cure-alls.

The message from the marketing gurus is to create a product for each market niche.

The first target - and it's more like a canyon than a niche - is the multi-million dollar sports supplements market. Trials have shown that velvet helps athletes recover from the strains and injuries associated with intensive training and competition.

In short, velvet helps sports people play harder, for longer and to bounce back quickly afterward. Hurricanes lock and All Black hopeful Dion Waller and Olympic triathlete Hamish Carter are just two of the growing number of top performers who sing its praises.

At present New Zealand is over-reliant on the volatile South Korean velvet commodity market for sales. But the deer industry has shown that it is capable of thinking strategically and responding rapidly to market signals.

It's hard to imagine that the burgeoning nutriceuticals market won't soon become yet another deer industry success story.

At the NZ Deer Farmers Association's 25th birthday conference last winter much was made of the industry pioneers. People like Allen Ford, the Amos brothers and Rex Giles in the North Island, and the legendary Sir Tim Wallis and Sir Peter Elworthy in the south.

But without taking anything away from the vision, drive, energy and sheer guts shown by these individuals, some acknowledgement about the role of the government in all this is long overdue.

The brilliant work done at Invermay Research Centre in Otago - funded by several million dollars from the taxpayer - now forms the basis of good deer farming practice.

Then there were the schemes - special partnerships and the like - which encouraged thousands of city investors to put their tax dollars into deer investments in the 1970s.

Such schemes are now almost universally scorned by commentators. But this criticism chooses to ignore the pivotal role tax breaks played in allowing the deer and kiwifruit industries to rapidly achieve the critical mass needed to become viable.

Sure, the incentive schemes could have been better targeted and managed, but 25 years later the proof is there for all to see: the deer industry is a success story, creating value for farmers, building exports and providing jobs. Taxes forgone a quarter century ago are being repaid with interest.

The contrast with the dismal performance of our listed corporates, for whom the playing field has been so carefully levelled and manicured over the last 15 years, could not be much more obvious.

The lessons from all this?

First, there need to be entrepreneurs who are willing to risk everything for their vision: the Rex Giles and Tim Wallis's of this world.

Second, the government needs to help fund the research needed to make their vision a reality.

Third, there needs to be government encouragement to private investors who are willing to risk their own money in selected entrepreneurial ventures which play to New Zealand's strengths. While this means picking winners, it still leaves it to private investors to shoulder most of the risk.

Fourth, the government should allow the venture or industry sufficient time to find its feet, then it should get out. With the deer industry, it was pure coincidence, but when Sir Roger Douglas's blunt axe fell in 1985, it was at about the right time - though it would have led to better business outcomes if investors had been forewarned.

New Zealanders want a first world standard of living. But because our country is at the bottom of the globe and has a small domestic market, it's a very difficult place to do business from.

But when strategic government assistance is combined with kiwi entrepreneurial energy, the results and benefits can be spectacular. The deer industry is probably the best example.

Published in the New Zealand Herald, 15 January 2001.

- Trevor Walton

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