Why Expensive Teas are Expensive (And Cheap Teas are Cheap)

Does more expensive teas generally taste better? What are the factors behind the pricing of tea? With so many different teas available, and a wide range of prices, it’s worth to understand the pricing rationale, so that you can make a more informed buying decision.

1. Supply versus Demand
The most basic reason for prices to differ is how much demand there’s for a type of tea relative to how much supply available. Imagine there are two equally good teas, but one has only an annual supply of 100 KG while the other has a much larger annual production of 10.000 KG.

The farmer of the 100 KG tea will tend to keep the price high, to maximise it’s sales. The other farmer faces risks of not being able to sell out his stock, and will keep lowering the price to increase the sales.

This at the same time proofs more expensive teas aren’t necessarily better. Supply and demand dynamics are very obvious in reality, with seasonal weather being on of the most important factors affecting supply. Too many consecutive days of rain or drought can ruin a harvest.

This is also a reason why agricultural insurance is on the rise in China.

Trends also affect the demand of a specific product at a specific point in time. In 2015, there’s was a new research publication backing the health benefits of Honeysuckle tea. At that time, the demand suddenly surged drastically. Because the producers were short of stock, they increased their prices.

2. Brand
Now imagine that there are two equally good teas with equal supply conditions.​ However, now one is offered by a company with a strong brand, while the other doesn’t come with any brand at all. The first will come with a higher price, because the customer sees value in the brand. It could be that the brand offers stable quality and thus piece of mind. Others offer a complete experience, such as an environment that allows them to enjoy consuming the product. Starbucks is a very good example from the coffee industry.

In addition, companies invest in their brand by incurring for example overhead and marketing costs. These costs needs to be recovered, resulting in markups on the retail price.

3. Packaging
Related to the brand is packaging. Packaging add value in several ways. A tea bag can be considered convenient packaging, as it makes the preparation of tea easier compared to loose leaf tea. Packaging can also keep teas fresh. Take for example, pouches with zip closure that can help to keep your tea fresh. Or tea in tins, that are more suitable as a gift.

4. Age
For some teas, especially pu erh, the age also affects the price. For those teas, the ripening process result in a better flavour and aroma.

Assume there are 2 tea cakes made from the same quality of raw material and from the same origin. However, one cake is 10 years old while the other is just 1 year old. The older cake will be much more expensive. A pu erh tea lover will be willing to spend more money on the 10 year cake, simply because when buys the 1 year cake, he’ll have to wait another 9 years before he can enjoy the same taste. Thus, saving time can be seen as valuable.

5. Storage Conditions
When tea is harvested, it might not be all sold directly. When tea is stored properly, the quality can be kept fresh, and thus sold for a better price in the future. Coming back to the pu erh cakes, this becomes even more important. Cakes that are preserved in the right conditions, ripen and develop a better flavour, making them more valuable.

Do you know any more factors? Feel free to leave your ideas in the comment section below!

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