Producers split to form new company to market velvet

The disbanding of producer shareholding parties in the newly formed NZ Velvet Marketing Company is disappointing after only two years in existence.

From an outsiders perspective, although some problems  existed with slow payment and GST issues, the goals of disciplined selling over the season to achieve sustainable prices seem to have been achieved by NZVM.

The new producer company Provelco reports that the basic concepts of NZVM and themselves are the same, so the question must be asked why did this partnership not work? The new situation is messy and will do nothing to instill confidence in an industry that desperately needs the stability to achieve a sustainable future.

The deer industry has always prided itself on having an industry approach so that all parties may prosper, but this new structure reverts back to the "us and them" strategy  that has failed in the past. Will you support this new company that will be 100% producer owned?

As from 5 November 2010 ProVelco Co-operative Limited will provide all producers an opportunity to be part of a 100% producer owned co-operative, following the disbanding of the four-way joint venture represented by New Zealand Velvet Marketing Ltd . While ProVelco has been built on Velexco Co-operative Group as the base company, the ProVelco brand, strategic direction and philosophy have been developed in partnership with the Suppliers Council (SCC), combining their interests to create an enhanced co-operative open to all deer farmers, and offering a full sales and marketing service for the new velveting season.

Consequently, for the first time in the history of deer farming, velvet growers will have the opportunity to control a united grower-owned company focused on selling their product to maximise returns back to them. The mechanics of the agreement dealing with NZVM finalised this week are that Tasman Velvet Processors Ltd will purchase Velexco Co-operative Group Ltd’s shares in NZVM.

The new company has an enthusiastic new board of directors, who are acting in a semi-executive role during the implementation phase.  As the company has faced some restraints while the NZVM agreement was finalised, it has been constrained in the implementation of some of its goals for the current velvet season.  This means that for this year ProVelco will be purely a brokerage company but we intend to work towards expanding the company’s services over the coming seasons to a position where ProVelco can take full ownership of velvet and implement value-added marketing strategies.
 

The basic concept behind the original NZVM, that of accumulating a sufficient volume of velvet to enable disciplined selling to maximise returns to growers, was the right idea at the time and it should have worked. Unfortunately, right from the start NZVM suffered from strategic misalignment between its shareholders. Despite numerous attempts at resolution, those core differences could not be resolved. The only solution was to disband and allow disaffected grower interests to pursue producer control.
 

Superficially, some producers may see that having a choice between two competing brokers is a good thing, but exercising that choice responsibly is the most important decision they will make this season. Both NZVM and ProVelco (for this season at least) are brokers and both will get the job done in a similar fashion. However they have two totally different philosophies and motivations, and farmers must choose which one to favour with their supply, otherwise the advantages of a consolidated critical mass of velvet will be lost. In the end there can be only one dominant marketing company.