Recently the China Tea Business School has published its qualitative research on the effect of the corona virus (covid-19) on the tea industry in China. The number of new corona virus cases peaked in February, and entering April overall situation is under control. What’s the state of the Chinese tea industry?
Tea Consumption Increased
Let’s start with the good news. Though the supply chains in China were highly disrupted, the research concludes that tea consumption actually increased. During the lockdown, people had more time, and tea consumption became a way of leisure at home. Tea consumption is also expected to remain at an elevated level for the near future.
Another factor is health consciousness. After the epidemic, the number of people drinking tea as well as the amount of tea drinking increased. Due to the epidemic, people have become more health conscious. They believed they need to maintain good health and improve their own immune system, should they ever need to fight the virus themselves.
People who originally did not drink tea begin to buy and drink tea. This was especially the case after the launch of the new 2020 Spring season teas.
Note: There are no exact figures increased consumption, because the publication is of qualitative nature. Surveyed companies only needed to report whether they saw and increase, decrease or same level of sales.
An Industry Reshuffle
The research shows that the corona virus affected smaller tea companies and merchants harder.
Larger tea companies with a better online presence quickly occupied the demand left by small companies. Small merchants often rely offline sales and sales to friends and relatives. With store closure their sales dropped significantly.
Gift tea in decline
Small growers and merchants also tend to offer premium quality teas, which are often purchased for gifting. The lockdown regulating resulted in less people buying premium teas. So, demand shifted to high value for money teas for daily drinking. They also tend to rely more on selling through offline stores and tea houses.
Smaller growers and merchants often don’t have their own brand. These uncertain times have shown consumers prefer to buy well-known brands and take less chances on names they’re not familiar with.
Buy at Origin in Decline
China has a huge tea tourism sector. People travel to tea mountains to taste the new harvest and buy directly from locals. As a result of travel restrictions, tea shops and tea growers who rely on tourism has been badly affected. Only those who have a good reputation have done well during the crisis. Growers that have maintained their social media accounts, have been better able to stay in touch. Buy sharing pictures or videos of their new seasonal tea, they’ve been able to maintain good levels of revenue.
Merchants that sell tea online, have done very well during the crisis. Online merchants have embraced online ads and live broadcasting to generate sales leads.
Yet, online sales still have their challenges. Many merchants don’t support free returns and aren’t honest about the quality of their tea. The tea industry will evolve and lead to a rise of tea enterprises that emphasize quality, service and integrity.
At last, due to high consumer acquisition costs, companies often don’t make a profit on the first sale. Customer retention is important, which makes good quality tea and excellent service ever more important.