Friday, April 28, 2006

Be very cautious in the pu-erh world (2)

Teaparker has followed up with 2 more articles (part 3 and part 4) about the pitfalls in buying puerh.
Let me translate, summarize and comment his newest recommendations:
- Don't even trust the media, be they general or specialized. Some news are so hyped that even independent experts sheepishly rally behind them to avoid becoming outcasts.
- Tea magazines are made by the industry, not by the consumers. (My note: this is plain to see in Taiwan: they use almost the same pictures for ads as for the articles. One add usually also helps pay an article in the magazine I have.)
- The tea retailers typically talk up their teas and talk down the ones sold elsewhere. (Teaparker sometimes also likes to state the obvious!)
- The tea experts are too seldom truly independent. Teaparker urges them be more critical and less influenced by the powerful tea merchants.

In the fourth article, Teaparker discusses what can be done against the "asymmetric information" in the tea business.

But let me first explain how the asymmetric information theory works in the tea business. The producers and the big merchants have all the information about their teas (what leafs, production technique, exact date...) but the consumers are pretty much in the dark about it. All they know is what they're being told. According to economic theory, this situation typically creates markets where poor product offerings dominate (a good example is the used car business), or even a collapse of the market (the .com bubble comes to mind). To fight against that problem, the economists recommend that the information be better shared with consumers. (I think this is exactly what my blog intended to do! I had no idea my behavior was Nobel prize material!)

So, Teaparker thinks that the first thing the consumer needs to learn about puerh is what is 'wild' puerh. There are 3 categories of puerh:
1. Wild grown trees that have never been cultivated by man.
2. Old big plantation trees that have been abandoned by man.
3. Plantation trees planted and cultivated by man.
A consumer needs to understand what is wild to be able to judge by himself.

Also, people speak a lot about storage, be it dry, humid or clean. But Teaparker says storage is less important than the intrinsic tea quality. Puerh tea should have a pure, not a mixed, taste.

At the end, Teaparker issues his often repeated warning: only quality puerh is worth storing and maturing. Currently, the asymmetric information in the market has caused lots of people, merchants to store (low quality) puerh in hope they can sell it later at much higher prices. This may lead to a future collapse in the market of old puerh. This situation also creates opportunities for independent tea critiques to help educate consumers about puerh.

Well, at the end of the artile he should have a link to purchase his puerh book (in Chinese)! It's pretty clear that Teaparker is trying to become that independent expert. However, his job is tougher than Robert Parker and that of independent wine experts. All they have to do is to come up with a list of likes and dislikes. In tea, there are few labels and they are often copied. So the ultimate goal is to pass enough information so that the consumer can become his own expert.


David said...

The following is an exerpt from an email I sent to Stephane earlier today. I am posting it here in order for Stephane to have the chance to post his answer for the tea-reading public. It focuses on the 2003 Yi Wu cake that is displayed in the photos that accompany his posting. I believe the questions I ask are relevant to the topics he discusses in his posting:

"[snip]My real questions about the 2003 Yi Wu are regarding its cost. Why $150? Is the price reflective of higher labor and processing costs, including higher wages paid to the workers, or is it more the result of a collector's market? I guess my tough question is, how much mark-up is occurring once it leaves the factory? Sorry if this is too pointed a question, but when a tea (or wine, or cheese, or any handmade food product) demands this high of a price at such a young age, I feel it is a question that needs to be asked.

I should state that I love every tea that I have received from you -- especially the 2003 YiWu sample. I think that you are providing teas of a consistent quality unmatched by few vendors who caters to English (and French) speaking drinkers. Thank you for doing so. I also thank you for the information that you provide regarding tea in general, and your products specifically."

[I have made a few diplomatic changes to the section quoted]

Stephane said...

Dear David,

One reason I don't post the prices of my products online is that I don't want to turn this comment section into a discussion about pricing, but about the teas and their quality. Nevertheless, I can understand your concern. I remember I also balked at paying that price level 18 months ago, when I had not entered the tea business yet. But I still decided then to purchase 14 cakes (7 for my son, born in 2003, as a gift for his 18th birthday). I was also wondering if the price was fair or hyped, inflated. So let me reply this particular comment, but consider it an an exception.

I still don't know if I can give a very good answer as I don't know the original cost structure of the cake, how much went for salaries, material, shipping... What I know is that I am currently using a little lower markup on this cake compared to my other puerhs. So, at least I am not taking any undue advantage. From the Yunnan mountain pictures and accounts from Teaparker, it seems to be very difficult to access the mountain area where wild puerh grows. He had to be literally carried by local people to see the oldest and wildest trees during his trips there. So it does take much more time and effort to harvest these trees compared to the plantation trees that are located in the lower areas on even ground. The money going to the harvesters must be proportionnally bigger for this tea than for others. What I wonder is if they also need to pay something to have the right to harvest in these high mountain areas or if this is open to anybody?

As for the production, quality was a priority since the material was so precious and I guess that this means that the local factory was in a good bargaining position to get a good compensation. But that's just a guess.

This is looking at it from a cost point of view, but I think we also have to look at it from a price point of view, which means comparing it with other cakes in the market.

Let's take my 2001 wild YiWu from Fu Hai Tea Factory, which costs 55 USD for 350-375 gr. The 2003 cake weighs 500 gr, or 40% more. If the 2003 were also 375 gr, then it would cost 109 USD or twice as much. The question is then: is the 2003 twice as good as the 2001? For me, there is no doubt about it! It's even 5 times better, if you want. There is no way to scale it properly with so few other references above it. (It also depends on personal taste, of course).

Actually, according to theory, the leader in a market would command a higher markup than the followers. Take the oolong tea competition winners: 600 gr cost 10,000 to 25,000 USD in the last 2 years (record prices) and they are not that much better than their peers (which cost much less). (Same could be said about wines, branded stuff...)

So, for a collector's market, this tea should be priced even much higher. And when I see how it has already improved since I first drank it, I am very confident (and afraid at the same time) that the merchant will soon increase its price!

David said...

Oops, sorry Stephane. I forgot that you do not post prices. I should have paid more attention to that.
I just wanted to give you a chance to post the reply you sent me. My guess is that I am not the only one to ask this question, and it is nice of you to address it.

~ Phyll said...

It is indeed a tough job for Teaparker to educate the public about tea, especially with the secrecy, fraud, and misinformation being forced down the throats of consumers by non-independent sources. It is, overall, not as consumer-friendly as the world of wine (not to say that the wine culture is less sophisticated than tea culture, or more honest). So, for many people the research and understanding of all tea matters is a akin to a detective having an orgy with the same small circle of tea fans, at least in my case. The task is even more daunting when language is a barrier. To make matters worst, individual brewing methods is an infinite variable in assessing a tea's quality. So a treasure to you may be a trash to me.

Kudos to you for your blog, monsieur! I visit your blog often and everytime I learn something new, except when you write in French.