China's premium-tea prices have cooled, but it's still boom time for some
Prices have dropped significantly since their highs last year. Charley Lanyon finds the experts divided over where the market is headed
Hong Kong's first auction of premium teas captured imaginations far and wide last year, when interest was piqued by the sky-high asking prices. One 20kg box of narcissus oolong tea was valued at nearly HK$1 million.
Free-spending mainland buyers, who had already driven up the prices of French wines and fine art, were now turning their attention to tea, it was suspected. When the oolong went under the gavel for well over the expected price at the Sensation of Tea auction, it seemed that the tea boom prognosticators had been proven right.
This year's auction - Fascination of Tea - showcased even rarer teas at even more jaw-dropping prices. One cake of Qianlizhen Songpinhao puer, considered one of the rarest teas, was valued at HK$2 million. But when the gavel came down for the last time on November 26, it was clear that something significant had changed. Many teas struggled to reach their minimum prices, and the HK$2 million puer went unsold.
So, what happened? Some bulls were left wondering if the market had already gone bust. Was the pot plugged by an economic slowdown and anti-corruption drive in China? Or did the global trend in favour of coffee and wine appreciation mean the future of premium tea was uncertain?
High-end teas - especially puer, a fermented dark tea from Yunnan province that improves with age - each have their own back stories and mythologies, and boast great cultural import as well as exceptional flavour. They have become potent status symbols in modern China.
"The prices for famous super-premium teas in China have been the subject of a massive speculative bubble over the past decade, driven mainly by local officials driving up retail prices to garner bragging rights," says Tony Dick, director of Hong Kong distributor Tea Concepts.
High-end tea, like fine wines and other luxury goods, were casualties of the mainland's anti-corruption crackdown. Longjing - or Dragon Well, a roasted green tea from a village in Zhejiang province - was mentioned specifically by the government, and state media stories reported that the tea's price had declined by as much as a third, and was evidence that the crackdown was succeeding.
Experts agree that the anti-corruption drive has had an effect on consumption of the finest teas, but say the effects are exaggerated by the state.
Adam Hodge from Seven Cups, an American tea company specialising in fine Chinese tea, decided to investigate claims that the price of Longjing tea was falling. He found that while prices may have fallen in resale markets in Beijing - where prices were artificially inflated by officials willing to pay any price - in wholesale markets in Hangzhou, where the tea is from, prices remained the same or were steadily rising.
"The price in Hangzhou for Longjing tea has not decreased, never has, and it never will, despite what the media both here and in China have reported," he wrote in the company's blog.
According to Dick: "The price of vintage puer had started falling from its peak even before the current crackdown." But it's still far from cheap. "Just last year, a 100-year-old stack of raw puer cakes from wild tea trees sold for five million yuan (HK$6.3 million) a kilogram, or about HK$19,000 per cup of tea."
There is a consensus that the price of puer will continue to fall, which Dick says "might explain the lack of buying interest at the auction".
Other local experts are more sceptical. "The price of puer tea has gone up and will continue to go up a lot," says Dickson Lau Tak-sang from Ying Kee Tea House. "Not much changed after the corruption crackdown. The market maybe slowed down a bit, but not too much."
For those in the business of selling tea, Lau says, this is still a boom time. "The market is going up slowly, but for the past two or three years there has been a big change because the customers coming from mainland China are big spenders. They buy the most expensive teas and big quantities. Our oldest puer tea is from 1961 and costs HK$70,000 for one piece of cake. They'll come and buy maybe 100 pieces."
China's wealthy officials may think twice before splashing out on super-expensive teas to avoid public displays of conspicuous consumption, but premium teas by their nature will always be an expensive commodity.
"A premium quality tea will be hand-picked and processed using traditional techniques handed down the generations," Dick says.
"Often, the tea gardens will be hundreds of years old and only produce two crops per year. These artisan teas have a distinctive flavour, unique to the garden they come from. While it does cost more to produce a premium tea, the extraordinary prices paid for some teas reflect the scarcity more than anything."
Vincent Chu Ying-wah, a tea expert and the organiser of the recent auction, shrugs off suggestions that the anti-corruption drive has had much of an effect. In fact, he says, the tea that failed to sell at this year's Hong Kong auction sold for HK$2.5 million just afterwards, to a mainland buyer in a private sale.
For Chu, the failure of the auction was just a case of bad timing, taking place in a year in which other major tea auctions were held in Asia - "diluting the market".
The notion that the younger generation is turning its back on tea in favour of beverages such as coffee, wine and spirits is also disputed. Although some young people in Asia may disdain the tea-drinking habits of their parents in favour of something more Western and trendy, the opposite is more often the case.
China's exploding economic clout owes much to its rapidly growing middle class, and young consumers who are proudly Chinese are looking for ways to express their Chinese identity in their consumption, experts say. Tea fits the bill perfectly.
Chu concedes that "it is very true that old tea or collection-grade teas are mainly collected by older people", but young people are starting to get in on the action.
"More young people like tasting tea, and the tea market is growing in the world because young people have become a new target of the tea market," he says.
Lau agrees: "Nowadays, it is more and more young people. We've changed our decorations since 2005 in our 10 shops; we changed our decorations to suit the young people."
Chu baulks at the notion that coffee and wine are replacing tea. It's just the opposite, he says. "I think people prefer drinking tea rather than coffee now. The tea market has seen greater growth than the coffee market. And, tea culture is more popular than wine now as people are pursuing a healthy living style."
The numbers tell much the same story. On the global stage tea is booming. Thanks in no small part to a craze for foods that are considered healthy and natural, premium tea consumption is growing by 5 per cent a year, one expert notes.
And, arguments that tea is being upstaged by coffee fall flat considering Howard Schultz, the CEO of Starbucks, has publicly stated that these days he is more of a tea drinker. Schultz has put his money where his mouth is, buying American tea retailer Teavana for US$620 million and has said Starbucks "will do for tea what we did for coffee".
Surprisingly - given that Hong Kong is caught between two of the world's greatest tea-loving nations, England and China - the city has never been a hotspot for tea appreciation. Hong Kong lags behind the mainland, Taiwan and even Macau in terms of premium tea consumption. Hongkongers tend to take their tea cheap, over-brewed and sweetened with milk; it's seen more as part of a social ritual than as a beverage worthy of reverence.
Still, Hong Kong seems to be catching up with the global trend, though Dick says it is driven "more by an appreciation of Western-style teas".
The people behind the coffee shop, The Coffee Academics, recently opened The Tea Academics in Causeway Bay, and other coffee shops are following suit. Many coffee hot spots in the city, alongside five-star hotels, also now offer their own unique blends of premium tea.