Wooden pallets donated by Mainfreight were chopped by community workers into kindling, which was sold by the bag at ReStore, providing cheap fire fuel to residents and funds for Malcam Trust youth programmes.
As temperatures plummeted, the $5 bags of kindling were rationed due to soaring demand.
Department of Corrections service manager Coyla Cameron, of Dunedin, said between 50 and 60 bags of kindling were chopped and sold each week.
Every bag provided a profit of $4.50 for ReStore - established by Habitat for Humanity New Zealand in partnership with the Malcam Trust and run by volunteers.
The money went towards Dunedin youth programmes, which community workers considered a worthy cause.
Community work supervisor Peter Seque said any initial scepticism from workers quickly dissolved.
"For a start, they tend to think someone's making a lot of money out of it, but once they know what it's for, they get stuck into the work.
"And I suspect some actually come in [to ReStore] and buy it [kindling]," he said.
The concept of providing cheap firewood through community work was not new to Dunedin, Ms Cameron said.
A similar programme was established by the Lions Club of Port Chalmers about 10 years ago and in 2006 the link with ReStore was formed.
It aimed to provide work for community workers in winter, when rain and other weather conditions often prevented them from completing regular labour such as rubbish collection and community beautification.
Hundreds of workers had served the community through the firewood initiative, which had also resulted in a strong relationship between Corrections, ReStore and the Malcam Trust, Ms Cameron said.
Its success in Dunedin prompted Corrections to implement a similar service in Balclutha, in partnership with the town's Salvation Army family store, she said.
"It's providing useful, meaningful work for community workers and it is something other people get benefit out of.
"It is very much a local community thing," Ms Cameron said.
