Newslinks (24.08.2007)

The price spiral of Pu'er tea

2007-08-24 China Economic Net

By Yang Qingxin, Zhou Bin

In the first half of 2007, the dealers and producers of Pu'er tea once experienced the "switchback."

The Yunnan spring tea continuously increased from about RMB20 or 30 yuan per kilogram at the beginning of 2007 to RMB60 to 70 yuan universally. The "Pu'er Seven Cake Tea" costing around RMB30 yuan was priced at RMB300 yuan to RMB500 yuan. From this May, the price began to drop, now the "Pu'er Seven Cake Tea" priced at RMB500 yuan can hardly be sold out.

Since 2000, Yunnan Pu'er tea gradually became popular in China, together with the price increased successively. Is the Pu'er Tea price empty high?

From 2005, some people worried that the Pu'er Tea price was abnormally high; some tea plants thought the price was too high, and did not dare to purchase. Unexpectedly, the tea price remained high in 2006. In the spring tea-picking period of 2007, the tea price did not drop, but rapidly increased by one time instead in comparison with that of 2006. The purchase price of famous spring teas of the six major tea mountains in Yunnan even astoundingly increased to about one thousand of RMB per kilogram.

In the harvest season of spring tea in 2007, the reporter visited Lincang -- one of the producing areas of big-leaf teas in Yunnan. At the time, Lincang was holding the 2007 Lincang Tea Culture Fair; the trading market was crowded with people conducting business busily.

But after May, the Pu'er Tea price began to drop. The "wind vane" of Pu'er Tea -- Pu'er Seven Cake Tea 7542 (Item No.) of Menghai Tea Plant continuously declined from RMB 22,000 yuan per piece in the middle March to around RMB8, 500 yuan in July 25th. It is learned that the varieties suffered serious decline in price recently were mainly the famous brands taking 70 percent market share, e.g. Dayi, Xiaguan and Zhongcha, the second-class brands were not influenced too much.

Mr. Liu Qun, the General Manager of Yunnan Mingzhong Tea Co., Ltd., told us that the market price exerted little influence to second-line enterprises. Under the precondition of ensured quality, the enterprise may reduce cost by blending technology and produce products accepted by the market. In addition, tea production and sales are of seasonal characteristics, the high season lasts from each October to the next April, it is normal that the spring tea (from the Spring Festival to April 25th) is more expensive than the rain water tea (after May).

Pu'er Tea is old crude tea or processed tea made from big-leaf sundried green tea after pile-fermentation, aging, drying and molding processes. The processed tea after artificial pile-fermentation, aging, drying and molding usually is about 40 percent higher than the crude tea in the year in terms of cost.

Professor Shao Wanfang, the President of the Tea School of Yunnan University of Agriculture introduced the three main characteristics of Pu'er Tea: First is its unique producing area -- the drainage area of Lancangjiang River in Yunnan; Second is the unique raw material -- the big-leaf sundried green tea in Yunnan, which generates large amount of beneficial bio-enzyme in fermentation; Third is the unique processing technology. Usually mature Pu'er Tea should undergo several processes as de-enzyming, twisting, drying and pile-fermentation. Across China, only the Yunnan processed Pu'er Tea adopts such producing technology.

What is the reasonable price interval of Pu'er Tea?

Mr. Liu Qun said the Pu'er Tea price differentiated because of different producing area, the key factor was the quality, for example, the first spring tea was priced at RMB120 yuan per kilogram on Bulang Mountain, Xishuangbanna in the fastigium this year, now it had dropped to RMB100 yuan per kilogram, but the relevant costs of tea production kept increasing.

Pu'er Tea is an excellent variety among all kinds of teas. The successively increased price is attributed to its unique functions. Mr. Gu Hangqi, the General Manager of Kunming Pulan Hexiang Tea Co., Ltd., believed that there were some rationalities for Pu'er Tea to increase price, but the increase should be within a reasonable scope. From another perspective, the price increase of Pu'er Tea in recent years is attributed to the long-term underestimation of its actual value. By 2000, the famous teas as West Lake dragon well, Anxi Tiekwan-yin, Dongting Lake Biluochun have broken RMB 1,000 per kilogram, but the Pu'er Tea was priced at RMB10 yuan to RMB20 yuan per kilogram only. Its special producing area and unique processing technology determined its difference from other teas; its incomparable health care function, the character of more time more spicy and profound historical and cultural connotation determined its investment value. Green tea can only embody its maximum value in the first year, in the next year things will be different, but Pu'er Tea is totally the contrary. Therefore, Mr. Gu Hangqi believed that top-quality Pu'er Tea could continue to increase in terms of price from long-term perspective, but this increase should be stable. Considering the storage and other factors, the increase rate better remained around 20 percent each year in a period.

The idea of stable price increase was accepted by some tea businessman and tea sippers from Kunming Kangle Tea House. During the interview, some relevant personnel said that it was very astonishing that the price of new tea increased by several times in 2007 in comparison with the sales in previous years, but vicious publication of Pu'er Tea was desirable.

Mr. Yang Shanxi, the Director of Yunnan Provincial Tea Office said that the price fluctuation in the first half of 2007 could be attributed to the factor of season, but mainly the deliberate publication by the dealers. At present, the value return is a necessity of market adjustment. Mr. Yang said, "Pu'er Tea is a kind of popular drink, which cannot be promoted as a kind of investment." He revealed that Pu'er Tea was not scarce commodity, and the yield of Yunnan had reached around 80,000 tons in 2006. From now on, Yunnan Province would give priority to support the 36 counties with annual tea output above 500 tons, accelerate the planning and construction of modern tea garden and promote organic and pollution-free production technology, as well as strictly restrict the use of fertilizer and pesticide. By 2010, the pollution-free tea gardens will reach 3.5 million mu.