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Bringing Back The Rational Pu-er Market

Article: Guang-Chung Lee

On may 30th 2008, I had the great honor and pleasure to present the topic "The Profound World of Puerh" to the Core Conference Program of the annual World Tea Expo in Las Vegas, More than 100 people attended the seminar. I was quite surprised by the number of attendees, and it did show the US market interest in puerh. Most important, the sad collapse of the puerh market at the end of 2007 did not seem to affect the US market's growing interest in it.

What happened to Pu-erh market in 2007

The prices of puerh have seen dramatic changes in recent years. Especially in 2007, the wholesale price of one of the biggest factories' products jumped 5 to 10 times within less than a year. Every Puerh fan or collector suddenly became a tea economist, and the trade centers in Guangzhou and Kumming were more like Wall Street than tea markets. Some people has already predicted the storm was near and such price surging was unsustainable. The situation was more like this: farmer enjoyed instant fortunes, tea factories and their main distributors helped push up the wholesale prices, investors and traders quickly exchanged large volumes of teas and every transaction moved up the prices of further. Tea stares, while they may start to worry, could not help but buy teas before the prices surged even more.

But the real problem happened when the consumption of Puerh, especially the current year, did not increase at the same pace as the sudden increase in production and prices. For China's domestic market, the teas that most people consume are still green teas, flower teas and tie guan yin. Puerh may have frequently made the headlines or appeared big and promising in newspapers or magazines, but the centries-old tea drinking habits of people has changed little.

So, the tea stores were stuck with many new puerhs that did not sell well. And even if they were sold, the cost to restock them had jumped several times! In either case, tea stores became short on cash or profit, and many decided to close. The negative wave quickly propagated backwards to the wholesalers, the distributors, the factories and eventually to the farmers. And voila! The whole puerh market collapsed at a speed that was faster than most people's predictions.

The market correction continued into the spring of 2008. As shown in the figure, the mao cha from modern plantations this Spring fell to roughly the level of 2003, and that from old plantations fell to roughly the level of 2006.

At Hou De Fine Tea, we were also struggling with the idea to buy or nor to buy in 2007. Luckily, we decided to mostly watch the craziness of the 2007 market from the sidelines. Except premium productions from one or two reputable private producers or some worthy early 2000 vintages, we did not make any large purchases. We were thinking, that if the market continued this unsustainable trend into 2008, we would give up the business in of puerh altogether.

Rational market and consumption is back

The collapse has brought fresh air and ration back to the market. People have learned that puerh as an investment tool can collapse just as fast, if not faster, as it surges. We think the short-term to the market actually makes it healthier in the long run.

When you look at other major types of teas - green teas, oolong teas and black teas - the production each year is roughly balanced to the total consumption, including those of the beverage industry. Puerh is the only tea that can sell on the "future", and the production capacity far exceeds the actual consumption of ant given year.

Although Puerh has a unique ''collector's market" that acquires tea not just for immediate consumption, but for collecting and aging to enjoy in the future, can the size and growth of such a market healthily support the production end of the market is the big question mark. To grow a collector's market, not only for Puerh but for any collectible in general, takes a long time and an effort to educate. The internet, blogs and the Art of Tea Magazine indeed facilitate the establishment of such a market, but nothing can happen in an instant.

We also have heard that avid puerh collectors have decided that they have enough to drink by yixing clay teapot for many years so they will now slow down or stop buying altogether. Therefore, it is possible that the collector's market will also reach its saturation without continual growth.

So the solution to a healthy and sustainable Puerh market lies in the continuous growth of both the collector's market and the consumer's market together. There was a big investment market for Pucrh, but after 2007 it could no longer play a significant role. The consumer's market for puerh has existed for centuries. But the surging interest in Puerh since the mid 90's has largely focused on the collector's market and may have deprived resources from the consumer's market.

The differences in demand for Collector's market and Consumer's market

The essence of the collector's market is the future quality of Puerh through aging. The essence of the consumer's market is the immediate enjoyment of its taste and health benefits. Mingling the two totally different demands can cause trouble for producers, vendors and consumers alike.

Also, from the collector market's point of view, the move limited the quantity and the higher the quality, the better altars for the future. From the consumer's point of view, the better the instant taste and the more affordable the tea is the better. Again, mingling the two totally different demands creates troubles.

Making uncooked (sheng) puerh does not require too much skill, but the quality of mao cha plays a decisive role. On the other hand, producing cooked (shou) puerh does require a lot of knowledge and experience in the fermentation process. The artificial fermentation process was only invented in early 70's, so there is. no reason why we won't see more advancement to improve the aroma, taste and hygiene of the process in the future.

Yunnan has many old tea plantations, scattered around many different mountains and remote villages. Tea tress on those plantations - in Chinese: we call "Da Shu Cha" - are allowed to grow to their natural form, height and root depth. The local climate vegetation, insects, animals and plants have co-existed in harmony for centuries. The quality of the ten leaves from Da Shu Cha is the backbone of the antique-grade (pre-50's) puerh. Newer examples Menghai Green Big Tree black-lable or 1999 Yi Chang Hao also prove a superior taste, aroma and aging progress, like puerh from Da Shu Cha following traditional methods.

Those old plantations require little human effort to maintain - in fact the less human activity the The production quantity is by nature limited, and chat fits nicely with the request of the collector's market. Even the market was heavily corrected at the end of 2007, those genuine Da Shu Cha puerh teas had a much smaller impact than those af modern plantations. In fact, most of them have still seen reasonable value appreciation and hotter pursuit from collectors. So, we have learned clearly from the experience of the 2007 market, that Da Shu Cha is the future of the collector's market.

On the other hand, Yunnan has massive areas for modern plantations with selected cultivars. The artificial fermentation process from the 70's using those plantations leaves - in Chinese we call this tea "Tai Di Cha" - has a proven record of quality and consumer preference. There is not doubt that from Tai Di Cha we can happily satisfy the market demand for tasty and healthy drinks with affordable prices.

So, in conclusion, my vision of the Puerh market's future is consists of two categories:

For the collector's market - sheng (uncooked) Pu-erh from Da Shu Cha

For the consumer's market - shou (cooked) Pu-erh from Tai Di Cha

Older is not always better

We frequently hear Puerh fans complain that "since 200X, the quality of Puerh has gone downhill" or "this year's quality is getting worse than before". It is almost commonly accepted that "older is better", "traditional is better than modern". Mostly this is true. But an educated Puerh lover needs to go beyond and read the "fine print".

The changes in climate or the planting/harvesting activities affect the production quality of tea. But what is more important is that in every year, every season and every harvesting region, there arc always good teas and bad teas. Spring is the best season, but not every Spring-harvested tea is good. Finding good teas from a good year and a good season is not nearly as challenging and exciting as finding good teas from a bad year and a bad season - and that's a genuine demonstration of a discernible taste.

Although the Puerh market has seen craziness and turmoil in recent years, it has also witnessed a significant revival of bona fide traditions. We have to understand that the history of Puerh has not been a smooth and gradual evolution, especially in recent decades. When China started the "Great Leap Forward" in 1957, the quantity of production was the only concern of Yunnan's tea producing authorities. Large acreages of old plantations were destroyed and replaced by densely-planted modern type plantations. The genuine traditional method of making puerh was substituted for modern machines for mass production, It was a political crime to keep the old traditions and did not follow the "Great Leap Forward" doctrines.

So when people chant "older is better," are they praising the period in Puerh history when genuine traditions were destined to be destroyed?

Similarly, I often read tea connoisseurs or even tea masters in Taiwan remember the good old days when farming was more natural and the "cha qi" of oolongs was stronger. But the fact I have witnessed is: in the "good old days" Western chemical companies marketed heavily to Taiwan's agricultural industry the magic of modern chemical fertilizers and pesticides. With little knowledge about chemistry, the fact that those chemicals worked so well and fast, and the general feeling that everything from the West was better and good, farmers borrowed money to try to get those magic answers to their fields. On the contrary, modern Taiwanese tea growers have become much more informed and educated. There are many very responsible growers and some devoted to organic farming with great results,Since the mid 90's, led by several avid tea lovers from Taiwan, the genuine traditional way of making Puerh was luckily saved from extinction. Beginning in 2000, we have seen more and more private producers from China, Hong Kong, Malaysia and Taiwan joining the parade to produce premium-quality pu-erhs by going deep into the mountains and overseeing every detail of production themselves. Those are the puerh teas that the collector's market should care for and focus on.

Older is not always better. When we look at the changes in planting/harvesting activities throughout the years, in every growing region, we learn that people stumbled and made mistakes at times. As long as we are honest and humbly learn from our past experience, there is no doubt we can have a better future.

Know what you want, buy what you need

The future of the Puerh collector's market is Da Shu Cha. The future of the Puerh consumer's market is good cooked (shou) Puerh from Tai Di Cha. Knowing the reason why you make a purchase - are you buying for collection, or buying for immediate enjoyment - will guarantee you a long and pleasant experience with Puerh. The same is true if you arc thinking or doing the Puerh business. Mingling the two markets and trying to find a grey area can hardly get you far.

After 2007, the Puerh market has become more rational and mature. I believe there is still a great future for Puerh. In the end, how many other teas have such a rich history, culture and geographical background and the excitement of aging to perfection like Puerh has? The Puerh market in Western countries is still in its infancy, and it is a blessing that we can weed out the craziness and opportunism before they imprint the wesf negatively.