STiR coffee and tea magazine

Volume 3, Number 3

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STiR tea & coffee industry international 39 million metric tons of tea grown in in their homeland. Sixty percent of Anji Bai Cha never leaves the Yangtze Delta, a financially well-to-do region that enjoys gourmet green tea. In the north, most of the tea is sold in Beijing and Shandong at a pre- mium price for gifting. China's four largest tea companies accounted for 45% of industry revenue which was estimated at $14.7 billion in IBIS World's 2013 report on China Tea Production. Exports accounted for only 322,581 metric metric tons, much less than the tea produced by Kenya and the small island of Sri Lanka. In 2012 China exported only 18% of its total production earning $1.4 billion in sales – about .0027% of China's foreign trade. However, revenue from exports grew at 8% last year due to im- proved quality and the fact that globally Chinese tea is in demand. Between 2001 and 2010, the global market share of black tea fell by 10% to 60%, while green and oolong teas combined saw an increase of 8% to 31% of the market. China now supplies 70% of the world's green tea with shipments to 120 countries. Tea production was suppressed during Mao Zedong's Cultural Revolution (1966- 76). The gradual transition from a state-owned to a privately held tea industry acceler- ated in 2006, spurred by production quotas and entrepreneurial zeal. Today the govern- ment run China Tea Co., Ltd., which was established in 1982 and consists of gardens, factories and export divisions throughout China, produces only half of China's tea. In the past companies like Zhejiang Tea Group, China's largest tea exporter and the world's leading exporter of green tea, sold its tea for $2 a kilo, settling for a profit margin under 5%. China's tea exports in 2013 averaged $3 a kilo, higher than the $2.60 "all auction" average compiled by the London-based International Tea Committee. Domestic prices soften Selling locally is the path of least resistance for producers in tea drinking countries like Taiwan, Japan, India and Korea. Governments in many producing countries impose tariffs and import restrictions to limit competition. In China self-produced products sold by growers are exempt from the country's 17% value-added tax (VAT). Chinese buyers know the great taste of fresh tea and generally offer the best prices in the world. Anji Bai Cha, the fabled Long Jing (Dragon Well) and Da Hong Pao are a few of the mass-produced teas in China that command an export price approaching what the domestic market will pay. In 2001 the price of West Lake Long Jing from Hangzhou was around RMB700 ($111) for a half kilo. By 2005 some of these teas sold for RMB 60,000 ($9,172) per kilo. The price then rose 70 times to the point where three government officials in 2011 jointly spent RMB 180,000 ($28,580) for a half kilo sold at a charity auction. To rein in this kind of excess, in December 2012 the Central Committee of the Communist Party of China (CPC) adopted an "eight point" austerity program requir- ing government officials to strictly practice "frugality and clean up undesirable work styles, including formalism and extravagance." Previously 20% of the tea was sold to government officials who often present the tea as gifts and drink expensive tea at formal receptions. This year the central govern- ment's total budget for official receptions was cut to $160 million, a small fraction of the previous high, according to the Ministry of Statistics. Premium Long Jing now sells for RMB 6,000 to 8,000 per kilo ($900 to $1,200) with most bringing around RMB 3,000 ($460) a kilo. This is the wholesale price at auc- tion; retail prices are as much as five times higher, around $1 per gram. Anji Bai Cha is a highly regarded money-making crop that in 1980 was nurtured from a single wild plant into a large-scale network of small growers and factories to meet domestic demand and export expectations. Anji Bai Cha from FirsdTea Anji Bai Cha packaging China market

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