On hucksterism and the collapse of the pu'er tea market:
The market may have collapsed, but the hucksterism is still doing fine, of course: ?The best thing about Pu?er,? he said with a showman?s smile, ?is that the longer you keep it, the more valuable it gets.?
That happens to be true, assuming the Pu'er is stored well. (I am
*not* in the tea business, I should say!)/Lew
As I'm sure you know, Lew, any pu'er tea may or may not improve over time, storage being only one of the determining factors. Nevertheless, regardless of a tea's future quality, its future _value_ (like that of any commodity) very possibly may have plummeted, as the article well describes. Hence the "showman's smile" that accompanied his claim, I assume....
Yes, Pu-erh as an investment has plummeted in value just like my 401k plan is currently doing. What I do believe is happening in the puerh market right now is what I would call "right sizing" within the tea industry. Aged puerh and speculation aside, when looked at it from a cost of production point of view, puerh was long undervalued in terms of its production costs when compared to the cost to produce other teas which sold for much higher prices. I think industrial economics will stabilize the market at a level more in line with traditional teas. In other words it will be a factor of raw material cost, labor cost, transportation cost etc. I believe this "true market value" will stabilize at a level much lower than "bubble" pricing yet higher than pre - bubble prices.
Puerh is an agricultural product, and as such it is a commodity. Quality will always bring higher prices but lets face it, how many agricultural products sustain unrealistically high prices in relation to the cost of producing them? Sure there are bubbles, bad years, drought, disease, etc that will spike the supply and demand equation, but in the long run it is still an agricultural product whose primary cost is the land and the labor to bring it to market.
Aged puerh is a different animal and will ALWAYS be subject to the laws of speculation, supply and demand, hype, maocha quality, storage conditions, etc. Aged puerh will always be priced at a level equal to what the market will bear. The connoisseurs of the world will continue to create a demand for the truly good stuff, the speculators will capitalize on that, and the con-artists will continue to try to cheat the uninformed. However, I doubt you will see the value of a 1950s Red Label drop, the demand for these scarce quality vintages is still very high. In 20 or 30 years from now the value of the current early 2000s cakes will ultimately be determined by its quality, especially since many inferior cakes were produced and the market will be glutted by these vintages. The demand for truly superior aged puerh will always exist amongst the connoisseurs and the elite so the good stuff WILL continue to increase in value even if you paid $100 a cake for current year production, but the value will be determined by quality rather than mere speculation.
What we just saw these last few years was a bubble created by a sudden increase of demand from an ever increasing, newly created, middle class Chinese market. It was a fad and symbol of new found wealth. As production increased to meet the demand, the value, and the quality, of current production plummeted. Many inexperienced people got into the market at all levels, many producers put virtually anything into a cake and called it puerh, many inferior teas were brought onto the market, and many speculators and consumers made poor buying decisions. It will probably take another year or two before the market fully stabilizes, the focus will return to quality and the inferior producers will be eliminated.
That my two leaves worth, brew it or leave it.....
Mike Petro
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