Silver Fern Farms chief executive Keith Cooper said it was "extremely disappointing" the commercial benefits of the business case prepared for accessing China had not been grasped.
He said in an interview that while there were risks and large investment was needed, the long-term benefits were huge.
"The way I saw it was that we could not afford not to."
A consortium of Silver Fern Farms (SFF), Alliance and ANZCO, together with Meat and Wool New Zealand and New Zealand Trade and Enterprise, has been assessing the merits of developing the Chinese market, our second-largest lamb customer but which bought low-value cuts.
Alliance and ANZCO have now withdrawn from the process, which started with five companies. Alliance chief executive Grant Cuff said it did not stack up financially.
Mr Cuff said an initial "desk top" evaluation calculated expected sales of 10,000 tonnes of super premium lamb within five to 10 years at a net financial gain of $24 million.
But a more detailed in-market study was less bullish, believing the market would grow to less than 900 tonnes in 10 years, with a negative return.
"I understand at least two of the three companies said the turn-around was so significant a business case was not warranted," Mr Cuff said.
Mr Cooper said a collaboration model was the best way to tackle the market, identified by almost every other sector as having the greatest economic potential in the world.
He accepted it would require combined investment from each company of several hundred thousand dollars a year for several years, but that investment needed to be looked at in the context of the greater prize.
Meat was returning $8000 a tonne in the United Kingdom versus $4000 a tonne in China, indicating the potential to increase the value of sales as affluence improved and the Chinese diet become more westernised.
"The opportunity is there to sell at the premium end of the market."
A collaborative approach supplying sheep meat to the United States had worked, and Mr Cooper doubted the potential of that market was as great then as that presented by China today.
SFF staff were heading to China later this year as part of a Government-led trade mission, but he hoped to continue working with Meat and Wool New Zealand (MWNZ) and New Zealand Trade and Enterprise to develop the market.
MWNZ chairman Mike Petersen said New Zealand already lagged behind Australia in developing the market, and he levelled the blame for the consortium collapse squarely at tension between companies.
"My personal view is that the rejection of this project by the industry was based on competitive tension domestically, supported by the lift in pricing in our more established markets."
It was a further example of the inability of the industry to work together, he said.
"We are now getting very frustrated at the lack of engagement and commitment by industry to several initiatives that have been championed within the sector in the past two years.
"A cynic might say that there is no chance of getting the industry to work together, which is an argument that has some validity, given recent setbacks."
Mr Cuff said the reason for Alliance's withdrawal was not dysfunction, but simple economics.
