Anzac Day poppies will no longer be made in New Zealand, with the Returned Services Association last night announcing it was switching to an Australian supplier.

The decision comes as a disappointment for Kilmarnock Enterprises, the Christchurch-based company previously tasked with supplying 1.4 million poppies each year for the country, excluding Auckland.

Rosemary Carr, the chief executive of Kilmarnock Enterprises, told Campbell Live last night the company has been making the poppies for around 30 years.

"It is part of Kilmarnock, it has been Kilmarnock and poppies ever since I can remember," Mrs Carr said.

Kilmarnock hires about 72 people, 30 of which are consistently making the poppies, she said.

Many of those employed have mental or physical disabilities and Mrs Carr said they may struggle to find other employment.

"This is the sort of work that they can do and they really thoroughly enjoy it, of course."

Mrs Carr said the company did tender for the contract in collaboration with Christchurch RSA, and said it was a "great disappointment" to lose out, particularly for the employees.

"I'm also disappointed it is apparently going offshore."

Labour Party MP Ruth Dyson said the loss of the contract was a big blow for the Canterbury region, coming on top of September's earthquake.

"The contract in Christchurch is worth about $132,000 and the loss of that income is a very harsh way for the employer and workforce to move into Christmas," Ms Dyson said.

"It is also very obvious that the staff were very proud to be able to make the poppies, knowing that so many people would be wearing them on Anzac Day."

RNZRSA chief executive Dr Stephen Clarke defended the move offshore as it would ensure the greatest possible amount of funds raised for veterans and their families.

"We decided some time ago that it was necessary to go out to tender to streamline our supply process and ensure the best possible value for money for the veteran," Dr Clarke said.

An independent tender panel reviewed the quotes received and the RSA's National Executive Committee decided Australian company Cash's, who supply the Returned Services League across the Tasman, was the best offer, he said.

"Cash's (Australia) Pty Limited will therefore be the sole poppy supplier to the New Zealand RSA from 2012."

Dr Clarke told Campbell Live Cash's, who supply Australia's RSL, could produce the poppies for $100,000 less each year than Kilmarnock.

He said Poppy Day is the association's major welfare fund raiser and it was vital the returns were maximised for their benefit.

"All the money raised locally is spent locally - so money raised in a community is spent on the welfare needs of returned servicemen and women in that community," he said.

"As always the RSA is committed to the continuing support of our veterans and to honour the memory of those who have given their lives in times of war or conflict. Ensuring that the Poppy Day fundraiser is successful and earns the maximum amount of funds possible is part of that commitment."