Firstlight Venison

October 2008
Firstlight Venison is a relatively new company that is a new model of a supply chain for the meat industry.

Firstlight Venison is half owned by Firstlight Foods and half owned by 21 farmers. It is all about getting the producer and the consumer together and Gerard Hickey, Managing director, and his company facilitates that relationship. The 21 farmers know exactly who their customers are, they meet them, cook for them in stores, and the customers come to New Zealand to visit their farms.

This contrasts with the other company Gerard and his fellow directors run called Cerco Venison, which is simply a processing company with 630 suppliers, and no contracts, no timing, and they process the same amount of venison as Firstlight.

Gerard says the wider meat industry has struggled to get the ideal supply system, and so it hasnt succeeded yet. But what the sheep industry is talking about is what Firstlight Venison is doing now.

Gerard says they have done a number of things differently to make their business succeed:

- Opened up the business to make it transparent.

- Firstlight doesnt want all the farmers stock; only the stock they can supply

- Made the farmers commit for three years. Trust us and we will give you a base price. Everything else we make above that is yours because we are only taking a commission. Each year the farmers have to commit for one more year

- To give the system even more cement farmers cant supply unless they take a shareholding

- On top of that there is a high level of communication. Four times a year they all get together either at an AGM, on-farm, in front of customers or when visitors come out.

Most venison farmers have seen highs and lows, a prime example is a farmer who said to Gerard recently: You guys are onto something. I went to see my bank manager and said were getting $8/kg, and he said but when will it crash? I couldnt borrow any more money out of them.

Gerard says the Firstlight guys know what they are getting now, they can make long-term decisions, its all transparent.

Gerard says the other aspect is that Firstlight Venison is a retail supplier. We target five global retailers. But venison elsewhere goes to the German game market, where venison is sold to chefs, which is very fickle. The retail trade is far stronger. In Germany venison means game meat, so if there is a big boar kill or partridge kill, then chefs will switch to those meats, and dont want our venison. And the season is short from October to December, and thats when NZ product has to be sold frozen. NZ slaughters stock for 12 months but goes to the Germans once a year and negotiates a price for product sitting in store. So if theres been a low kill we screw them, if a high kill the reverse happens. Instead, Firstlight has long term supply relationships with big retailers in the UK, US, Holland and NZ. The other thing is that we are marketing differentiated products. We are also the only group growing their stags to hard antler. Our selling point is differentiation. All our stags are hard antlered. This differentiation is also why Firstlight work with Wagyu beef as opposed to traditional beef.

The group has breeders and finishers. There are some big Central North Island Maori incorporations breeding. Breeders have traditionally got hammered when the market is low, and then they make huge money other years. We put a line through the middle. Its the biggest issue in the sheep industry as well: everyone wants to finish lambs but no one wants to breed them. The weaners are transferred at the same price throughout the whole group. But the breeder also gets half the final procedes because he does half the job, retaining part of the ownership through to processing. This is also an incentive for the breeder to produce a very good weaner.

Marcus Kynoch and his wife Kirsty farm at Ashley Clinton against the Ruahine Ranges, where they have 400 to 500 hinds depending on the season and 80ha deer fenced out of 960ha.

They have been committed to Firstlight from day one.

Marcus: We were trying to link up with finishers. Weve been farming deer for 12 years, and it was either a feast or a famine. We came into the industry on a high, and had to deal with quite a long time of lows.

We produce around 400 weaners a year, they are all wapiti cross and we buy our replacements in. In 2010 we will have the first stags available from a Firstlight initiative AI breeding programme. We winter some of the younger ones, about 50, through. All the weaners go to FLV. Most go to Duncan Holden.

Has it changed the way you farm? It has given us a lot of confidence in deer, especially with droughts in the past affecting when the finishers are willing to buy. We know when they are going to leave and we have confidence in that. We definitely have the confidence to increase our herd, and are increasing deer fencing.

Within two years we hope to have 600 to 700 hinds because we have that assurance. It is so safe compared to what we are seeing in the sheep industry. Gerard has a model up and working. It is what MIAG and the other guys are trying to get in place.

When you first join the group you have to accept that you are taking a long-term vision. There are times when the local market will peak beyond what we are getting.

But there are no downsides, because we are taking a long term view. We initially had a three-year commitment to Firstlight and have a contracted minimum price for the 12 months ahead. Any further gain made through the model is paid back to the finisher and breeder as a pool payment. Retaining some ownership of the animal means we supply what the finisher wants but most importantly what the customer wants. The venison price is going crazy at the moment but the industry could go through another boom and bust scenario. But we will still be in business. The main thing is we get a lot of enjoyment out of it. We know what price we are getting, when we are getting it, we know the finishers they are going to and the whole process has complete transparency. Its given a new lease of life to our deer farm. Its a lot different from me trying to sell my store lambs. I often drive past Duncans and look for my eartags as I drive by. And its also exciting for us having new customers coming to visit. We really enjoy having them out to the farm. And we have got a great product. We are really enjoying being involved.

Interview with Duncan Holden, finisher

Duncan, who farms Forest Gate at Ongaonga with his wife Wendy, takes the weaners and finishes them. They have farmed deer since 1984.

He joined FLV about 18 months after it started up.

Duncan: I like the idea of price certainty for 12 months, that has allowed me to focus on production.

He says it hasnt been easy, as theyve had to change a few farm management practices. They use more crops such as chicory, and he is planning to plant other specialized crops as well.

This year they are finishing 800 weaners, all of which are going to FLV. Before FLV they used to supply deer from October to January. Now its from October to January and then again from April through to August.

He says they are in for the longer haul rather than taking spot prices by the week. I believe the longer term system is the way to go. We can focus on growing our animals and dont have to worry about the price.

They have 140ha deer fenced, and want to increase numbers to finish from 1200 to 1500 per year.

Asked if he thinks the same principles of FLV could be used in a wider way in the meat industry, he said FLV was small scale, with the group of farmers hand-picked and interviewed before joining the company. Hes not sure it would work on a larger scale.

The 21 farmers in the group elect a co-coordinator who is currently Peter Swinburn. The group contract to each other to supply Firstlight Venison. That means if Duncan cant supply one week he works with Peter to find enough to meet the supply. The group members have to support each other, since the group has to supply every week of the year. For three years the group hasnt missed a beat. Because the finishers dont velvet, the deer grow bigger. The majority of the deer are reds because the meat is perceived as being a finer texture than say a wapiti cross animal.