STiR coffee and tea magazine

STiR coffee and tea 39 Hsu sees similar surges in China's domestic tea market, where the demand for puer, Tieguanyin, and white tea surpasses local supply. However, these in- creases don't match matcha's global popularity. Petersen remains optimistic about spillover ef- fects. "Consumers have grown a liking and curios- ity for the taste and benefits of tea that they never knew through their discovery of matcha," she ob- serves. This curiosity may eventually benefit other tea categories. Supply Crisis Triggers Dramatic Price Increases Japan struggles to meet the exploding global desire for matcha. This supply-demand imbalance creates unprecedented market conditions. Chun reports dramatic price increases across all quality levels. "The 2025 harvest prices have increased 40-70% outside of Kyoto and 200-300% for Kyoto-grown matcha," he reveals. These increases reflect acute supply shortages. Premium Uji matcha from Kyoto faces the most severe constraints. Japanese tea exports, including matcha, reached a staggering high of approximately ¥3.64 billion ($24.7 million) in 2024, around 2.5 times the amount re- corded in 2019 (see Surging Japanese Tea Exports Face Tariff Speed Bump, p15). This exponential growth se- verely strains Japan's production capacity. Weather challenges compound supply problems. Kyoto, home to the most prized Uji matcha, saw dramatic drops in temperature in spring 2025. Climate factors are reducing yields from Japan's most prestigious growing regions. Another issue is that production infrastructure cannot expand quickly enough. Building new tencha factories requires multi-million-dollar invest- ments. "There are a few thousand primary factories, but only a little over a hundred factories that can produce tencha," Chun explains. Market Manipulation Concerns Emerge Supply shortages create opportunities for market manipulation. Petersen observes producers increasing prices strategically. "All producers have chosen to essentially double their prices, manipulating the supply-demand balance," she notes. This forces importers and buyers toward alternative suppliers. Quality compromises become inevitable for price-sensitive consumers. "Buyers that are adjusting to the price increase are finding innovative ways to communicate the value of real matcha," Petersen explains. Mislabeling practices increase as demand outstrips supply. "Many retail- ers choose to market their matcha products as ceremonial grade even though they're not," reports Petersen. No regulatory enforcement exists for these marketing claims. Hsu doesn't necessarily consider this malpractice. "It's only the most likely scenario in the open market as a result of free competition," he argues. However, Hsu warns about potential consequences. Quality and price stabil- ity disappear when product life cycles become unpredictable. American and Asian Markets Drive Consumption According to statistics from the Japan Tea Industry Federation, 43% of ex- ported powdered green tea by volume went to the US in 2024, and 78% of Japanese tea imported to the US that year was powdered. This overwhelming concentration creates significant market risks. In the United States alone, matcha sales have reached more than $10 billion over the past 25 years. American consumers show particular enthusiasm for matcha-based beverages and foods. The United States, Taiwan, and Germany are the leading importers of Jap- anese tea. These markets demonstrate sustained appreciation for Japanese tea culture, and each region shows different consumption preferences. Among US imports, powdered green tea, including matcha, accounted for 75% of the total import value, while Germany and Taiwan had more imports of other types of green tea, including loose leaf. China represents another significant growth opportunity. The Chinese matcha industry is worth over $1.2 billion. However, only a small percentage of restaurants currently offer matcha products. Fourth-generation tea farmer Yoshiaki Hattori is one of the few growers in Japan to produce small-batch single-origin matcha entirely from his own garden. Photo credit: Tealet The overnight success of Starbucks' matcha lattes immediately inspired other brands to launch their own versions, propelling matcha into the coffee universe. Photo credit: Khanh Nguyen

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