Guest Contribution by Max Chiang
Senior International Marketing Manager | Int’l Dept | HJC Group
A few days ago, each big tea market officially reopened, so part of the tea enterprise stores have been restored to business.
To understand more accurately the impact of the epidemic on the major tea enterprises and tea merchants — and also to help tea enterprises and tea merchants recover as soon as possible — HJC investigated and interviewed more than 100 diverse tea enterprises and merchants, including:
Mengdai tea factory (勐傣茶厂)
Shuangchen Pu’er (双陈普洱)
Guming Daoxuan (古茗道轩)
Anhui Qimen Black Tea (安徽祁门红茶)
Dilemmas for the Chinese Tea Markets
1. Because work resumption is impeded, the capacity cannot immediately be fully restored
The outbreak has forced many enterprises to press the pause button and tea enterprises and merchants must face the situation of a temporary shutdown of offline (face-to-face) channels. According to the data, during the epidemic period 69.77% of the tea stores were completely closed, while 16.28% closed most of their stores. Only a few stores remained open.
2. Difficulties for consumers to reach the market
During the epidemic, the flow of people was limited and even the tea shops that continued to be open were empty. Customers are rare. It’s a massive blow to tea enterprises and merchants who rely on offline stores as the primary sales channel.
3. The decreasing revenue and increasing cost, which brings financial pressure
According to statistics, under the epidemic situation the tea enterprises whose store revenue decreased by more than 50% accounted for 65.11%, among which 34.88% of the enterprises’ store revenue was almost zero.
At present, the epidemic is not over and tea sales become key. It is likely that after the resumption of the market, for a long time there may be lower sales that will put huge financial pressure on tea enterprises.
34.88% Zero income
30.23% Revenue drops 50%~80%
18.61% Revenue drops 20%~50%
5.81% Revenue drops below 20%
10.47% No marked change in revenue
4. As market uncertainty increases, production and marketing docking may be delayed
The deterioration of the market environment, the weakening of sales, and the uncertainty of the market continue to lower confidence for tea enterprises.
The outbreak of the epidemic has added more uncertainty to the market plan of tea enterprises. The value of sales data and market situations from previous years has weakened, and the enterprises cannot accurately estimate the market demand. According to statistics, 54.1% of the tea enterprises said that it is still unknown whether they will go to the tea producing areas to collect tea during the spring tea season, and they will need to decide according to the specific situation of the enterprise and the external market during the epidemic period.
37.5% Enterprises will purchase raw tea materials
8.33% Enterprises will not purchase raw tea materials
54.17% Enterprises haven’t decided
To be concluded in Survey of Chinese Tea Industry by HJC – Part 2
Images provided by author