If you have any interest in tea – and most probably you do or you wouldn’t be reading this – you likely have read about the escalating price of tea in China and the rest of the world. As a tea lover, you may be concerned that your favorite Dragon Well or Big Red Robe will eventually be cost prohibitive, except for an occasional indulgence. But before you reach for your Kleenex, listen up – rising tea prices may not spell all doom and gloom.
First, a disclaimer: I am a tea retailer, but I am not saying this because I can reap more profits. On the contrary, as a non-producer of tea, this impacts me more. The rise in the cost of tea outstrips the average consumer’s propensity to pay for artisan, hand-crafted tea (at least outside of China), so increased tea prices are actually detrimental to my bottom line. Why then am I not greeting this news with tears?
As a tea lover, I want sustainability in this business. Ten years, twenty years, and fifty years later – if the Lord wills – I want to be able to enjoy quality tea daily.
Quite simply, it would be inconceivable if all the pickers, farmers, and producers eventually left the fields to join the blossoming urban work force just because economic growth and inflation render survival in the fields impossible. In this dystopian future, the only available tea would be machine-picked and machine-processed, bagged CTC tea produced and distributed by large state-run or multinational corporations.
This could be a reality as pickers and farmers increasingly send their children to the city to work. An average, unskilled laborer could earn somewhere in the area of USD 300 per month in a large city. Just a few years ago, a tea picker earned closer to USD 30 per month.
Small wonder many are ditching the fresh air of the countryside for the polluted, congested cities. According to Wikipedia, the population of Guangzhou doubled from about 6 million in 1990 to 12 million in 2010, a phenomenon made even more incredible given China’s one-child policy. I have no statistics on this, but I reckon more than a handful came from rural areas in Guangdong province, including Chaozhou, where those wonderful Phoenix Dancongs come from.
The art of hand shaking (zao qing), roasting or firing, and even picking tea leaves requires dedication and commitment to master. Skilled practitioners deserve a premium for their mastery and effort. Not to mention the fact that a decent remuneration would attract new entrants into this trying industry to replace the old masters when they retire.
The rising price of artisan tea will help retain talent in the fields. If the price of quality remains unaffected by decades of double-digit GDP growth in China, it is hard to imagine anyone choosing to remain in, let alone join, this field, family heritage or otherwise.
Of course, there is no doubt that the rise in prices is also partially driven up by speculation or for cultural reasons. For example, the recent, well-published price of Pre-Qing Ming Shifeng Dragon Well (more than gold!) is by no means typical.
In China, the best – if not best known – tea has always been the property of emperors, provincial governments, and leaders. Famous teas, especially those from renowned bushes, have been coveted, not merely for their taste, but also as a status symbol. That’s why high-ranking officials or wealthy merchants willingly bid astoundingly high prices to secure these rare teas if they ever appear on the market, not for personal consumption but to show favor and reverence to business associates or family members. Astronomical prices for these teas are not representative of the entire market.
There are also speculative price spikes, like those associated with the earlier Pu-er and Iron Goddess (Tieguanyin) phenomena. The prices of Wuyi Rock teas have more than doubled in the past couple of years. There are signs that Dancong and some white teas may follow suit. These are not the price increases that I would greet with any measure of pleasure since they are not sustainable and could harm the industry.
It would be naïve to presume there is no element of opportunistic profiteering, especially among the middlemen and the retailers. There are many ills and abhorrent practices in this industry that go beyond the scope of this post. The tea industry has a way to go before typical consumers feel comfortable that the prices they pay are entirely justified. Yet before we get there, we must ensure the continual supply of artisan tea and there is no better way to do so than by allowing all members in this supply chain to have a means of earning a reasonable living.
So many factors go into crafting that high grade, artisan tea that is beloved by many. The skill of the tea masters and pickers is not acquired overnight. Nor are the natural complements of the fields, such as spring water, minerals, high mountains, and natural shade from sunlight. The epicurean pleasures derived from a fine cup of tea do not pale in comparison to those of fine wines. Why then should we begrudge those who labor to produce fine teas a decent livelihood, especially one adjusted for inflation and GDP growth?
You make some important points. My concern is that the pickers and growers aren’t the ones making the increase profit. If only there was a way to insure that the money went to those who work so hard to grow, pick and process these wonderful artisan teas.
I share the concern that the people that really put the effort and dedication into creating artisan teas aren’t seeing what they deserve of the profits. I would actually gladly go out of my way to buy tea from a source that I know “shares the wealth” with the growers, pickers and processors. While the rising cost of tea seems like it will be a good thing in the long run I still cringe now as I’m on a student income. O.o
Michelle/Trevor, I agree entirely that indiscriminately paying more for tea does not equate to raising the standard of living for farmers, pickers and processors but though it is not an end in itself, it is a crucial step.
Ultimately, the only assurance comes from free market forces, the same thing that ensures that automobile manufacturers are properly compensating engineers, technicians etc.
I can’t speak for all tea producing nations or even all provinces of China but in more developed provinces such as Guangdong, Fujian, Hangzhou and Anhui- farmers, processors are free to sell to whoever pays the highest. In fact, many farmers/producers in these regions open shop in wholesale markets in Guangzhou, Chaozhou etc bypassing a middleman altogether.
In these regions, skilled tea pickers are paid quite handsomely because they are in demand and are free to work for whoever pays the best- not having it dictated to them.
Ever since the era of Deng Xiaopeng, China has made tremendous strides in free market capitalism and this is reflected in the tea industry.
I can’t pretend I know this to be true throughout the entire China including the less developed areas but by and large, this is the trend.
As I mentioned in my article, not every incremental cent flows to the growers et al- that is blatantly untrue but there needs to be enough in order to keep them in the fields.
This is a bigger topic than can be covered in a post or even 10 but I just wanted to throw out a proverbial silver lining.
Very interresting point of view. But I am joining the other comment in additional concerns.
More over, prices in our society is mainly linked to offer/demand… If because of this price increase production is increasing to meet the market, the opposite -at the end will be achieve: more production, less quality, and probably nothing for the producer themselves…
Thanks for commenting.
The price increase is predominantly in China and is driven by demand factors- rising affluence of Chinese locals, growing popularity of tops teas etc. It is not a case of ‘tea cartels’ manipulating the prices but the market willingness to pay for it in China.
This has not translated to widespread increases in retail prices outside of China- at least not to the same extent. Willingness of consumers to pay for tea is lesser and by and large, I see the trend as retailers and wholesalers absorbing the bulk of the increase. For example Wuyi yanchas doubled in prices in recent years, no retailer I see matched that increase.
I threw this out for consideration because at some stage if the trend persists, this rise in prices will trickle down to the consumer.
Just another point of note- high end Chinese tea, by and large maintains its supply capacity. Wuyishan has 70 sqm and no new tea trees can be planted there.
Producers have limited capacity. Most of the quality producers in China operate ‘factories’ that are less than 100 square feet and often are operated by less than 5 headcounts. Between the picking of tea to production, the process must be completed within a month or so else the tea losses its quality. All this means supply of quality tea is quite fixed (yes there are knock-offs and inferior products riding on the name but that is a story for another post) but rising prices does not means producers can ramp up production at will.
Since their supply is largely static, their income is linked to price of these teas as opposed to quantity produced.
Thanks for this addition information :-)
Never the less, production can be also expended outside China, and even if not for the same product, people also like to change. Of course nothing can replace an original Dan Cong or Roc tea. Yet new tea with good quality can come up based on clones from high tea bushes. A good example is wulong from Thailand (Mae Salong city), based on Taiwan tea bushes.
Absolutely, free market economy is dictated by demand & supply factors.
Producers, wholesalers & retailers alike are not free to dictate the prices at will- if consumers do not see the value in their products at the selling price, the price is not sustainable.
As you rightly pointed out, there are other areas that can produce tea, albeit at a lower quality- just like fine wines. Famed French vineyards continue to thrive even when there are cheaper alternatives elsewhere.
There just has do be perceivable product superiority and market acceptance to command the premium.
Lochan Teas are leaders in the field (pun intended) on both counts: they have vastly improved the lives of tea workers – and women – on their tea planatations. Just last week I ordered a kilo of Yunnan Gold (jinnah), a Chinese tea from them, although they are located in Siliguri, West Bengal. I also ordered an assam – Harmutti. Lochan not only treats their workers right in every sense of the word, but their tea is fresh and lovely and good for multiple steeps. The real kicker is that the teas were the exact same price as they were six months ago when I ordered my last kilo and a half. Win-win: pickers and consumers are treated right, a way to keep both groups producing and buying tea for a long time.
Interesting article thank you.
For specialist teas, China is one of the fairest markets around due to the fact that still the bulk of good teas are still produced by families. Such small production units share profits more equally and with lower overheads. Overseas (read Africa, Sri Lanka, India) tend to be more business like and often rely on shareholders and investors which means dividends / profits are taken out, plus there tends to be a hierarchical distribution of wealth in the organisation i.e. the Directors –> Managers –> Workers take home (significantly) different wages.
As Derek mentions, many families take the initiative to expand their business by opening tea shops in local or big cities in order to maximise profits. It is also a great way for often university educated family members in their 20/30s to live in cities whilst still being connected to the family business. For many heading back to their village is not top of their list of ambitions when graduating.
Input costs are a major factor for China. Fertiliser, petrol (for the motor bikes transporting pickers, the picked tea and vans that take the finished tea to market), rents for shops/storage, wages for the many people that help out, electricity used for lighting, air conditioning, processing (especially baking) have all risen dramatically and will continue do so for the foreseeable future. The Chinese government is targeting 13% pa rise in wages in the next 5 years.
Touching on the supply and demand factor, what you are seeing is the huge growth in wealth in China. This rising affluence sees tea consumption growing and people increasingly buying higher quality teas whilst getting access to a much wider range than ever before. In Shanghai, Beijing, Shenzhen etc. you can now get teas from all over China. The market’s growth means that regionally limited teas such as ‘WuYi rock tea’, XiHu ‘West Lake’ Longjing, XiShuangBanNa Puerh and TaiPing KouKui are increasingly grown outside of the original regions. To be honest, much of the Big Red Robe (should be translated as Scarlet Robe) consumed in China and overseas is almost certainly produced outside the 70sq km UNESCO protected region. Whether this is an issue is a subject for another blog entry!
Hopefully places like Thailand, Myanmar, Burma, New Zealand, Hawaii, Georgia etc. can build tea industries based on flat organisations like that in China. Such organisations tend to be more focused on quality, producing unique products that are passionately made whilst gaining a good market rate for which the family can make a good profit. The challenge is entry to the market is not easy. Skills and markets tend to be developed over generations. Although the internet levels the field for selling, you are still looking at years to develop a business. This for many poor regions means the need for investors, which as we highlighted tends to involve larger organisations and overheads.
I really hope that the situation with the tea industry stabilize but I am beginning to think its a forlorn hope. I cen see teas that are quite economical sugar-laden, highly adulterated “Franken” teas that are out on the selves in the supermarket can save the industry yet artisan teas are in a bit of a pickle ever since it was ever around. I enjoy artisan teas itself immensely more than any other drinks, yet I’m bothered by the fact that part of the struggle of artisan teas that its a niche to many consumers and not mainstream thats causing the woes of these farmers (that I admire dearly). Now this is where it becomes tangled in the more of business because in order to sell these artisan products it may have to agree with the standards of the mainstream which of course a major sin! The other option is staying the course which inevitably leads these farmers to bankruptcy, which to me and those skilled farmers is killing off the remaining delights and cultures of the world just for mainstream demands.
Then there are a whole slew of problems with the lack of younger successors to the farming, coffee that may become dominant in the face of tea prices by the pounds , and pollution…it never ends is as if the business world against these honest farmers who at least makes worthwhile products. If only there is somehow a solution to make notice of artisan teas but all the while save its own face from these god awful stuff that people want in their drinks. Whatever happened to simply enjoying natural flavors?! I really hate to say it but its also the fault of the majority of consumers….just pitiful!