Difficulties in the Puer Market
I know some of you are aware of the volatility in the puer market, and I would just like to share with you my experiences on my last trip to China. I spend a lot of time in China and also a lot of time in Yunnan. As I travel around the tea producing provinces in China, I can find nowhere that puer isn’t a topic of discussion. It has never happened in history that one of China’s teas have affected the Chinese tea business so profoundly. This phenomenon has been primarily in the domestic market, but could have for reaching affects into the Chinese international tea market as well.
Just a little bit of background first. In China the economy has been booming, as everyone knows, and there has been very few investment vehicles for the emerging middle class. Chinese are savers. In fact the savings rate in China is over 60%. There are is a growing number of Chinese that feel that putting money in the bank is them same as losing money, enhance the red hot real estate market, the stock markets in Shanghai and Shenzhen where huge sums are being gained and lost by the minute. The puer market is one of these very shaky investment vehicles.
I was drinking tea in the Chamashi tea house in Kunming in 2004, this is the company that I buy all of my puer from, and this guy came in and joined our group with an entourage of people, that stood around and watched. There was a lot of discussion and some good tea tasted, and after a hour, they left. Chamashi attracts some interesting people, so I asked who they were, my Chinese being very poor, and was told that they were Guangzhou people that were asking to buy all of Chamashi’s puer. That’s a lot of money. The Chamashi warehouse is quite roomy and not only full of puer made by the company, but also puer that they had been collecting for themselves, that they sell from time to time to people they take a liking to. I have a few of those cakes myself. This was the first year that people started to sink some really big money into puer.
At that time puer was still relatively unknown in China except in Guangzhou, and Hong Kong. Of course Chamashi refused to sell to them. Chamashi was already very comfortable and and happy with life, and were happy to pass up such a deal, but Yunnan being a poor province others jumped at the chance.
In 2005 there was a phony auction, unlike India there are no tea auctions in China, and rumors about puer, compounded by rumors of high priced puer from 2002, spread quickly in the tea community. Small tea merchants with cash started buying as much puer as they could get their hands on with very little knowledge about puer. I started getting gifts of puer from oolong makers, and government officials a long way from Yunnan. In Guangzhou a wealthy Tie Guan Yin dealer invited me over to a tea house in a hotel the had hastily been set up to ask me to sample puer that he hoped to sell me, and in 2006 I was served a ‘thirty year’ old puer in a restaurant that featured a diner on the Qin river in Hangzhou on a million dollar yacht. The owner had spent a lot of money on this cake and it was very obvious that is was not thirty years old. This year I was given a fake cake by a tea expert in Hangzhou that had purchased in Hong Kong. She buys special tea for special customers as a side business. She has one of the best reputations in China and is not easily fooled. The cake was supposedly supervised by a Taiwan collector.
It is easy to see the progression of the sharp rise in the price of puer. It is true that puer was an undervalued tes historically in relationship to the other “Famous” teas of China, and may very well have reached it’s appropriate value, and could even be higher for the best examples. It will take some time for the market to sort it self out, but the key issue will be authenticity.
Authenticity has always been the issue with old tea, and there is not way to date it accurately, and there are plenty of inventive methods to to fool the unschooled. But now there is a vast amount of faked young puer, and the fakes are very good. Short of holding on to a cake for many years to finally discover that the tea didn’t age as expected, but in fact deteriorated, gives the fakers a big jump at never being caught.
This is a new kind of fake. Tea is pouring into Yunnan from all over China, Viet Nam, and even India to go into the production of puer. The existing black tea market is supplying tea, and is starting to lose the big bread and butter contracts, Lipton’s for example, that was dependent on the extra sweet Yunnan black tea for it’s blending. When I talked to native producers in the remote mountain villages Yiwu, I found that a large percentage of the mao cha being sold in the village market place was fake, at least not originating from that area. If the basic ingredients are fake, and the local tea makers have difficulty sorting through it, where does that leave us?
Authenticity is the issue, but that is the issue in the tea business everywhere. Is Darjeeling really Darjeeling? Is Long Jing really Long Jing? Is Da Hong Pao really Da Hong Pao? There may be provisions in this years farm bill that will call for a more transparent supply chain are country of origin labeling. The Chinese have instituted a seal of origin. More questions are being asked all along the chain by companies, consumers, and even governments.
So what about the crisis in the puer market? The locals realize that their future demands authenticity. The local governments are starting to crack down, and the market is responding. The price of mao cha was already falling when I was there. The really good companies have stopped buying mao cha from the village market place and have for closer alliances with the family growers. The quick money people stand out like a sore thumb in the countryside, and the people that are doing business with them are at the receiving end of a lot of community pressure to stop. Puer producing has cleaned up. The newer local factories are spotless with workers running around in white coats and face masks. I predict better quality. I also predict the companies that are less than authentic will stand out by price. One should aways be suspicious when buying cheap caviar.
I asked my friend to proof read this entry and to tell me what he thought. He said that my recent blogs sounded like muck raking. Perhaps that is so, and so be it. I hope that this is a buzz phrase that will catch with international consumers everywhere, and that people will start to demand it. TRANSPARENCY IN THE SUPPLY CHAIN