Thursday, March 02, 2017

The numbers behind a 50 years old puerh tea

At 16 USD per gram, this 50 years old raw puerh is not expensive. It's a bargain! The main reason for this claim is the quality of the leaves. 50 years ago, China was in the midst of its 'cultural revolution'. There was no money for pesticides or fertilizers. And there were no new puerh plantations at that time. All the leaves were harvested on wild or old arbor puerh trees. And it's because of the cultural revolution that crippled the production in the factories that these leaves were never pressed.

Nowadays, fresh leaves of such quality are easily worth 1 USD per gram or more (and you often have to pay this price for a 200 gr or 357 gr cake). 

We can measure the cost of time using the compounded interest rate. To obtain 16 after 50 years, we need an interest rate of 5.7%. (The formula is:  1.057^50=16 +/-.)

This means that if you invest now in top quality puerh that is worth 1 USD and if you wait 50 years to sell it at 16 USD, your return on investment will be 5.7%. Is this a lot if you consider all the risks that exist in storing tea for 50 years? There are risks of inflation, the risk of loss through theft, misplacement, the risk of the leaves not aging well due to bad conditions. And the biggest risk is that you may not be here anymore in 50 years to enjoy the tea!

With an 8% annual return, the price of 1 gram would be 47 USD and if you are expecting 10%, then the price jumps to 117 USD! These rates are more what you'd expect for one of China's most prized tea, aged raw puerh. That's why 16 USD is really such a bargain! (And it won't last indefinitely!)
With these 2 to 3 grams, I'm able to make multiple brews, at least 1 liter (Where can you purchase a 50 year old bottle of fine wine for 50 USD?) Most importantly, this is a tea that leaves a lasting impression. The taste is both thick and light, rich and pure. It's amazingly long. The scents of old precious woods, incense and camphor are a delight. It feels so natural, clean and still full of energy. And the effects on the body are warm hands and feet! It's a relaxing spa for body and mind.

For me, it's a glimpse of paradise!


EG said...

Hi Stéphane,
Very interesting post explaining the investment value and potential of a very special, aged puerh.. If you had started your article with your last sentence, however, all monetary justification would have been unnecessary... 'for me, it is a glimpse of paradise'!


TeaMasters said...

Hi EG,
Not everyone has the same reaction to tea. It takes some sensibility to tea and maybe some experience as well to feel how amazing these old leaves taste. We are probably a minority to feel so much happiness from a hot beverage. The chemical effect of this tea on the brain is, by far not as obvious as that of cocaine! However, it's much more real and pure!
The financial calculation, on the other hand, is rooted in facts and mathematics. It's a confirmation that the price of this tea is not far fetched at all.