A display of Chinese tea. Getty Images
Chinese Tea Culture Week kicked off on Monday at Expo Milano 2015, the world’s largest ongoing international food and beverage event. Over the course of the expo’s May to October duration, an estimated 18 million people from all over the world will attend — making it a great venue for promoting Chinese tea. Indeed, in terms of both exports and internal consumption, there are big opportunities for Chinese tea on the horizon.
China is the world’s largest tea producer, with more than 2.7 million hectares of tea crops, over 200,000 tea companies, and in excess of 30 million tea farmers (in 2014). China produced 1.98 million tons of tea last year, valued at over $56 billion and accounting for nearly 40% of the world’s total annual production. However, most of that is consumed internally. In 2014, exports stood at 301,000 tons, down 7.5% from a year earlier, and although export value grew 2.1% year-on-year, it only reached $1.27 billion.
Tea producers hope that China’s “One Belt, One Road” initiative (a massive overland infrastructural linkage of China to Europe) will supercharge the country’s tea exports all along the way. After all, tea has long been a staple of cultures all along the route — tea production from those regions accounted for over 80% of the global volume last year. And while China’s tea companies are still largely unknown to the world, some are getting in position to ride an anticipated global boom.
Xinhua news agency reported:
LongRun Selanmu, the firm’s new Halal tea, is aimed at the world’s 1.5 billion Muslims — with particular emphasis on the numerous Islamic countries along the “One Belt, One Road” route. Taking advantage of Chinese Tea Culture Week, Selanmu will be on display at the Chinese Pavilion during the Milan Expo.
China’s domestic market accounts for approximately $29 billion of the estimated at $65.2 billion global Ready-to-Drink (RTD) tea market. But China’s market has major growth potential — the country’s per capita consumption of RTD tea is only about one quarter of Hong Kong’s and roughly one-third of Taiwan’s. It is also telling that the three top tea firms operating in China come from these other two ethnic-Chinese areas: JBD Group is from Hong Kong, while Ting Hsin and Uni-President are from Taiwan.
In March, Starbucks announced that it aims to make its Teavana one of the largest global tea brands through a five-year plan to achieve $2 billion in sales, with the Chinese market as a major arena. Starbucks has partnered up with Tingyi (the tea-focused subsidiary of Ting Hsin) “to do for tea what we did for coffee,” i.e., create a whole industry of upscale tea shops selling premium varieties.
Although there is a widespread tea culture in China, as of yet there is no sizable tea-oriented service industry comparable to the multi-billion dollar coffee shop market in the U.S. (and in China in recent years) that grew out of American coffee culture. Most of the 60,000 or so tea houses across China are small kiosks that cater to the mass market. There are some tea franchises, but they are more “beverage-focused” than “experience-focused,” writes stock analysis firm SeekingAlpha. But as disposable incomes rise in China, the trend toward “premiumization” of the tea market should accelerate. For example, China’s second-largest tea brand Uni-President launched its CITEA milk tea in 2013 to fill the “gap in the high-end milk tea market.” More importantly, Teavana’s tea cafes will stand out from the local competition by targeting a higher-end market, and selling a unique tea experience rather than just a beverage.
Separately, as an integral part of Chinese culture, tea has the open encouragement of the Chinese government. The education system plays a key role in promoting the tea industry and culture in China and abroad, noted Sheng Jianxue, Secretary-General of China Education Association for International Exchange. Now all universities of China have at least one student organization dedicated to tea culture, so that Chinese people can develop a deep knowledge of tea culture from the time they are young, he added.
Still, despite opportunities and support, the road ahead for Chinese tea will not be challenge-free. Competition from other beverages, climatic changes, and worker wages are the key issues facing the global tea industry, according to a July study by the Chamber of Commerce of Ceylon, Sri Lanka. Climate change is most troubling because it is beyond direct human control, and as the report noted, the “tea plant is very delicate to the changes in temperature and rainfall.”
That said, tea drinking has thrived for thousands of years, and it remains the world’s second-most consumed beverage, behind water. Thanks to a mix of culture and savvy marketing, Chinese tea won’t ever go out of style.
