The Pu’er tea market is built on a rich range of products and a broad consumer base; setting aside the small portion subject to financial speculation, its fundamentals are solid and sound. (Photo by Zhao Guanghui, reporter of this newspaper)
Introduction
Recently, news originating from some self-media accounts about the Pu’er tea market being “in crisis”, even on the verge of a “crash”, has been spreading like wildfire in tea circles. Claims such as “Tea worth 10 million yuan is now worth only 2 to 3 million yuan, depreciating by two-thirds” and “Warehouses are holding tea bought for over a hundred million yuan that simply will not sell.” Is the Pu’er tea market really so bleak? What is the actual situation of the tea enterprises and merchants dealing in Pu’er tea?
All-media reporters of “China Cooperation Times·Tea Weekly” investigated and interviewed a number of Pu’er tea enterprises and distributors. Based on the information obtained, the above news reflects a plunge in the prices of “financial tea” within a small circle; for merchants dealing in mass-market Pu’er tea, even with a sharp contraction in sales, they can still sustain their businesses. At the same time, they remain optimistic about the long-term development of the Pu’er tea industry.
Falling Purchasing Power, a Sluggish Pu’er Tea Market
“Decline follows the peak” — no phrase could be more apt to describe the pattern of the Pu’er tea market’s development. Looking back over the past 20-plus years, the Pu’er tea market has seen “three rises and three falls”. In 2000, Pu’er tea began to attract market attention and affection. In 2007, Pu’er tea prices fell sharply and the whole market remained depressed for three consecutive years. During this period, Pu’er merchants selling at low prices and quickly dumping tea were everywhere. Afterwards, the Pu’er tea market recovered. In 2014, the Pu’er tea market entered another downturn, with order volumes plummeting. Compared with the chorus of “rising prices” in 2021, the Pu’er tea market fell into difficulty again in 2022.
In 2022, it was not only the Pu’er tea market that was sluggish — the consumer markets of all six major tea categories were shrinking. Affected by the COVID-19 pandemic, coupled with the impact of global high inflation, all industries felt the pressure. High inflation markedly erodes consumers’ purchasing power, undermines consumer confidence and causes global demand to shrink. Therefore, industries other than daily necessities mostly face enormous challenges.
Chen Chuping, owner of Zhirongzhai, is a distributor of Xiangyuan Tea (Xiangyuan Tea Industry Co., Ltd.) on Beijing’s Maliandao Tea Street. He said that some people, with a speculative mindset, attempt to scoop up high-value fine tea at cheap prices. Especially in recent years, as the craze for collecting Pu’er tea has soared, there has been no shortage of outside investors hoping to make a quick profit. But they know the name without knowing the taste; not only do they suffer losses themselves, they also mislead more tea merchants and tea drinkers, which is very detrimental to the positive development of the Pu’er tea industry. Speaking of this year’s Pu’er tea business in his shop, he admitted frankly: “We can only keep the shop running; sales have fallen by nearly 90%. Especially in early August, business can be described as extremely sparse.” He said that Zhirongzhai’s customer base is mainly middle-class people with annual incomes of 300,000 to 500,000 yuan, and its best-selling Pu’er teas are 15-year-old raw Pu’er and 20-year-old ripe Pu’er.
The reporter also learned that Pu’er tea sales channels are relatively traditional, with emerging models such as e-commerce and livestream sales accounting for a small share of overall sales. It can be said that Pu’er tea is more like a circle-based business.
Only Those with Capital Dare Enter the Pu’er Tea Business
In September 2020, a reporter of this newspaper visited Lao Banzhang Village, which looked like a construction site changing day by day — what underpinned this change was economic strength. (Photo by Zhao Guanghui, reporter of this newspaper)
The decline in market consumption capacity has led to reduced purchasing by distributors, and is bound to affect tea farmers’ raw-material transactions; many primary tea-processing workshops in Lincang, Yunnan Province, have felt this pressure. The head of a well-known tea enterprise in Lincang, Yunnan, told the reporter that local tea farmers do not make a living solely by growing and producing Pu’er tea. Tea farmers also store their newly made Pu’er tea; if it cannot be sold this year, they can adjust the price and sell it next year. Therefore, tea farmers are in no hurry to cut prices just to sell. At present, the enterprise is vigorously developing Pu’er tea’s attributes as a fast-moving consumer good, including adding smaller-format tea cakes and improving product cost-performance, in response to the current sales difficulties.
Generally speaking, most Pu’er tea distributors store 50% and sell 50%. As a non-essential agricultural product, Pu’er tea has the commodity attribute of being storable for a long time, with taste and value improving the longer it is kept within a certain period — slightly different from other teas, which are also agricultural products. Compared with other teas, Pu’er tea naturally has a certain resistance to risk. Green tea, for example, is a treasure in its year and grass the next, while Pu’er tea’s distinctive attributes neatly avoid this problem. All interviewees expressed their love for the Pu’er tea industry, but most also said that running a Pu’er tea business takes more than passion — it also requires a certain level of financial strength. Zhirongzhai’s tea stock, for example, is worth 50 million yuan.
Pu’er tea’s resource advantages are a gift of nature — an important reason why, through wave after wave of ups and downs, it can still roll forward. (Photo by Zhao Guanghui, reporter of this newspaper)
Pu’er tea market prices rise every year, and three key factors underpin this: good raw materials, good craftsmanship and brand endorsement. Although problems have appeared in market sales, high-quality Pu’er tea products will not be sold at reduced prices. The head of a well-known Yunnan tea enterprise said that the company’s Pu’er tea product prices this year were raised by 10% overall compared with last year. Shu Xue, marketing director of Yunnan Menghai Zhenghao Tea Industry Co., Ltd., also revealed that the company’s product prices were raised by 20% this year.
Strength determines posture, and posture determines mindset. Strong enterprises have maintained a not-bad posture and a fairly calm mindset amid this contraction of the Pu’er tea market.
Rampant Disorder Awaiting Regulation
In 2003, the Pu’er tea circulation market basically took shape. Over the past nearly 20 years, the industry has long lacked professional third-party institutions to provide guiding opinions. As the scale of Pu’er tea trading has expanded and more players have entered, market disorder has proliferated, and the absence of professional opinion has become increasingly serious.
A tea farmer surnamed Zeng from Xishuangbanna Dai Autonomous Prefecture in Yunnan Province has his own primary tea-processing workshop. He told the reporter that fluctuations in Pu’er tea prices over the past two years have not been large. At present, the Pu’er teas with firm prices and undiminished upward momentum are mostly scarce products, such as Bingdao tea produced in Bingdao Village, Mengku Town, Lincang City, and Naka Pu’er tea and Bangpen Pu’er tea from Xishuangbanna Prefecture. It is understood that Naka Natural Village is a Lahu ethnic hamlet of Manlü Village, Mengsong Township, Menghai County, Xishuangbanna Prefecture; and Bangpen Lao Village is a Lahu ethnic settlement of Hekai Village, Menghun Town, Menghai County, Xishuangbanna Prefecture, less than 3 kilometers from Lao Banzhang Village, and can also be classified as part of the Bulang Mountain tea area. He also revealed that capital sweeps up tea on the Xishuangbanna tea mountains every year; this buying model does not discriminate by quality, yet it keeps tea prices very low. It is understood that 80% of Xishuangbanna’s tea is bought up by Guangdong capital.
In July, when the market environment was severe and investor confidence was insufficient, the Guangdong Academy of Tea Culture released the first issue of the “China Pu’er Tea Brand Investment Value Index Report”. Lin Chusheng, president of the Guangdong Academy of Tea Culture, believes that the release of this “Report” can, on the one hand, provide a reference for Pu’er tea investors and, on the other hand, help boost market confidence. The “Report” shows that since the beginning of 2022, the Pu’er tea investor confidence index has continued to slide, falling from 87.32% in January to 40.29% in August, with market performance remaining sluggish. In response, Lin Chusheng believes that in the short term this impact will further lead to lower transaction prices and reduced trading activity; but in the long term, such a deep adjustment is, in a sense, also a reshuffle of the industry, and this reshuffle is beneficial to the industry’s long-term healthy development.
The Gloom Will Eventually Lift
Two-thirds of 2022 has already elapsed. In the remaining months and for some time to come, will the Pu’er tea market see a “return of spring”? On this question, all interviewees said there would be no major change in the short term.
At the Guangzhou Yiwu Tea Expo in November 2020, the Zhenghao Tea booth was “bursting with popularity”. (Photo courtesy of Yunnan Menghai Zhenghao Tea Industry Co., Ltd.)
In the first half of the year, China’s gross domestic product (GDP) grew 2.5% year on year, while China’s target economic growth rate for this year is 5.5%; in the first half of the year, household deposits in China increased by 10.3 trillion yuan, a year-on-year increase of 2.9 trillion yuan. This figure is significantly higher than in the same period of recent years, showing that residents are more inclined to save than to consume — that is, to turn money into deposits rather than assets. In Lin Chusheng’s view, the Pu’er tea market’s sluggishness will continue for the next six months. Only when the macro environment shifts, or bank interest rates fall close to zero, will investors take out their deposits to invest. Chen Chuping believes that the Pu’er tea market will maintain this tone for the next three years.
Pu’er tea — a special category among the six major tea types — has a unique taste, cultural depth, market popularity and collectible value. Therefore, this precious resource should be treated well. During the investigation and interviews, the reporter heard the aspirations of industry insiders:
——Industrial characteristics and industry players should not develop separately from one another. Ancient trees, famous mountains and small producing areas are Pu’er tea’s unique features, but plantation (tai-di) tea is the foundation, and the plantation tea produced by many modern ecological tea gardens is also an excellent product. Therefore, Pu’er tea should not be ranked into grades by origin. In recent years, the blind pursuit — and even reselling and speculation — of ancient-tree, famous-mountain and small-area teas has been irrational and should disappear as soon as possible.
——Drinking value is the foundation on which the Pu’er tea industry survives and develops sustainably. As practitioners in the tea industry, we should advocate: tea is for drinking, not for speculation. We must commit to continuously expanding the consumer base for Pu’er tea, so that Pu’er tea’s tomorrow takes firm root in the cups of the general public.
Produced by: China Cooperation Times·Tea Weekly All-Media
—
Author: Lam Sam (LamSam), the Old Tea Head
ZENTEA MANOR
Alliance Supply Chain Services Limited
Unit 902-3, 9/F, Mini Cube, 10 Sam Chuk Street, San Po Kong, Kowloon, Hong Kong
www.zentea-shop.com Email:info@zentea-shop.com
