Nicolas Tang's Blog

With Prices Near a Peak, Some See a New Bubble;
By IRIS KUO
WSJ October 2, 2007

ZHUHAI, China — In this booming economy, the latest investment fad has everything to do with the price of tea in China.

More precisely, it has to do with the price of puer.

A type of tea commonly pressed into Frisbee-shaped cakes, puer (pronounced “poo-ahr”), was long the domain of a small group of tea collectors. Earlier this year, speculators discovered the tea, driving up its value.

Puer, with a medicinal flavor and smoky aftertaste, improves with age unlike other teas that grow stale. Sellers claim it aids weight loss and lowers blood pressure.

The price of one of the hottest varieties of puer soared to nearly $35-a-cake this past April, seven times the $5-a-cake value just three years ago. Today, a cake of puer sells for nearly $16, a 60% backslide from the peak, fueling fears of a crash.

Puer’s popularity reflects how China, awash in cash and slim on investment outlets, is primed for speculation of even the most ordinary — or unexpected — assets.

The puer boom spurred 45-year-old Yunnan native Zhang Bing to open a puer exchange in June to help traders find willing buyers and sellers. The exchange, lined with shelves of puer cakes, doubles as a meeting place for a puer club Mr. Zhang started last month.

“It’s just like stocks,” said Mr. Zhang, eyeing the latest puer price fluctuations on a flat-screen TV mounted by the doorway of the new exchange.

Such efforts are frowned upon by collector Bai Shuiqing, 52, who is so well-known in the industry that his autograph appears on commemorative cakes of puer. Mr. Bai says he already has the “guanxi,” or connections, to sell his tea.

Mr. Bai is reluctant to talk about the value of his puer, saying he collects it for its taste, not its monetary value. Still, he estimates his 56 cakes of 100-year-old puer are worth about $640,000. He has two 150-year-old cakes whose value he declines to discuss. Last year, Mr. Bai started selling hand-selected cakes of puer marketed under his name.

At his vast tea warehouse in Hong Kong, Mr. Bai picked up a small piece of the tea, broken from its original cake, and placed it in an earthen teapot engraved with his name. He poured hot water in to rinse the leaves, discarding the first infusion, in what is called “awakening” the tea, and poured the second into a small, clear serving pot.

“Smell this,” he said, beaming, and held out the steaming pitcher of clear brandy-colored liquid, a hue indicative of well-aged puer. “This is the best tea in the world.”

Mr. Bai says he can divine the age of his puer by taste alone. Still, he keeps the authentication papers for each cake carefully sealed in plastic.

Like wine, puer is judged by vintage. At the top of the scale are 150-year-old cakes that can fetch more than $13,000. Newly minted cakes — which taste bitter and strong compared with aged ones — range from $13 to $25. Ideally, puer should be stored in airy, humidity-controlled rooms, away from sun and pungent odors that might penetrate the leaves.

Puer, once a gift for emperors, was long relatively unknown in mainland China. Even in Yunnan, where the tea is cultivated, locals preferred plain old green and black tea.

But puer’s popularity in Taiwan, Hong Kong and Guangzhou trickled to the mainland around 2004, stirring interest among consumers. Sensing a tourism peg, the local Yunnan government in 2005 sponsored an unusual publicity campaign for the tea in a modern-day version of the caravans that once plied trade routes to Beijing.

The caravans were stocked with puer from Yunnan tea companies that co-sponsored the event. The procession made promotional stops in major cities along the route to the capital. The voyage was broadcast on TV, anchored by Zhang Guoli, a famous actor best known for his role as Emperor Kangxi of the Qing Dynasty, the era from which puer dates.

Puer’s popularity skyrocketed, and the elite crowd of puer connoisseurs was joined by newcomers who possess neither their expertise nor their devotion to it. A 150-year-old cake of puer went on a promotional tour of the country in March, starting from the Forbidden City in Beijing. It arrived in Yunnan province later that month in the city of Simao, which had changed its name to Puer to help promote tea sales. The tour was sponsored by the city’s government, which billed it as a homecoming for the tea.

The Yunnan government recently named puer one of the region’s 10 prized cultural resources. In Beijing, puer cakes were marketed as a replacement for traditional moon cakes during the recent mid-autumn festival. Puer is cropping up in restaurants, which display prized vintages like a wine list. Exclusive clubs are opening in Beijing and Guangdong, where the rich gather to drink the tea and learn about its history.

Businessmen armed with cash were elbowing for puer by the case (each case contains 84 cakes). Tea leaves are being hoarded. It used to take weeks for the first batch of puer to sell out, according to Scott Wilson, a tea seller based in Kunming. This year, by the time it arrived in town, the entire stock was sold out.

Mainland Chinese tourists, toting magazines that chart the value of name-brand puers, visited Hong Kong tea shops to buy out entire stocks of recommended tea, says Henry Yeung, managing director of Sunsing Tea House in Hong Kong.

“They don’t know anything about tea,” sniffs Mr. Yeung, 30. Like others in the old-school puer crowd, he says novices, clueless about how to select and store quality puer, are likely to be duped by fakes.

Counterfeiters have printed knockoffs of popular labels, prompting one maker, Menghai Tea Factory, to employ Chinese money-printing technology to make its wrappers hard to duplicate. The company also set up a hotline for tipsters and established an investigative team to track suspects.

Other factories have cut production of regular green and black tea. Farmers are mixing in lower-quality leaves to puer harvests to artificially boost production. Long-time puer drinkers such as Mr. Yeung turn up their noses at the 2007 vintage, which they say is poor quality.

The boom has set off a wave of conspiracy theories on how it began. Some distributors whisper it started after one company withheld supplies to create the illusion of demand. Others posit that greedy businessmen hired imposters to bid up prices on their stocks of puer.

Tea industry officials fret about a crash. Still, current values are more than double what they were a year ago.

Farmers could be among the hardest-hit from a bust. Industry watchers say that thanks to puer, this year marks the first time tea farmers — many of whom are ethnic minorities living on the southern Chinese border — have made a livable wage. The broad-leaf trees that produce puer take three years to mature, meaning farmers who have invested in tea trees are gambling that prices will stay high.

Collectors like Barry Tam aren’t worried. This year, the 33-year-old who lives in Hong Kong bought a 100-year-old puer cake for about $13,000 and says he sold it six months later for double that. If the bottom should fall out of the puer market, reasons Mr. Tam, “even if I cannot sell it, I’ll drink it.”

SCMP Sunday March 31 1996
Black wins in beverage battle
Michelle Chin

GREEN tea could be a healthy choice for thousands of Hong Kong people with high cholesterol – but its popularity is rock-bottom with tea lovers.

Instead of the weak, light brew which is exciting pharmacists, Hong Kong connoisseurs clamour for the strong, black taste of pu-erh, the tea least effective at reducing cholesterol.

And industry experts doubt doctors can engineer a U-turn in tea tastes, regardless of any cholesterol-attacking properties of green tea.

Green tea accounts for only five per cent of Chinese teas which are consumed in Hong Kong, while pu-erh tea accounts for more than 50 per cent.

Drinkers sip on about 30 tonnes of green tea annually while pu-erh lovers gulp more than 3,000 tonnes of their favourite brew.

Hong Kong & Kowloon Tea Trade Merchants Association chairman Kwok Wan-lung said that local people simply had little taste for green tea.

‘They think green tea is too cool in nature, that it is for weak people. They may not be able to bear it,’ Mr Kwok said.

‘Elderly people are particularly afraid of being cooled by it.’ Green tea, which originates from Hangzhou, is more popular among Shanghainese and can cost from $60 a tael (30 grams) to $300 a tael for deluxe leaves.

Tea art teacher Alice Shum said Hong Kong people preferred stronger teas.

‘Local people don’t give green tea much credit because it is so weak that its taste doesn’t vary very much, unlike the fermented teas,’ Ms Shum said.

‘Chinese green tea is also said to have agents which can prevent cancer. But this also fails to make it more appealing to the territory’s tea lovers.

‘Oolong is my favourite. I don’t think I will switch to green tea as I don’t have a cholesterol problem at all,’ she said.

Mr Kwok said Chinese green tea was famed among Italians and Africans for its ability to cool one’s body temperature.

‘I don’t think this study will have a strong impact on people’s drinking patterns,’ he said.

‘Hong Kong people are unlike the Japanese, who are more likely to take every word given by doctors seriously,’ said Mr Kwok.

SCMP
Get the brew down to a tea

Interest in traditional Chinese tea-making techniques is stirring again as a new generation learns to appreciate the art, writes Winnie Chung

AN ANCIENT Chinese proverb insists it is ‘better to go without food for three days, than tea for one’. While the hungry may disagree, it illustrates how integral a part of Chinese life those parched and shrivelled leaves are.

According to Chinese legends, the drink was ‘discovered’ by a mythical emperor named Shen Nong, who was known as the Divine Cultivator and the Divine Farmer, in the year 2700BC. Shen Nong had been sitting in the shade of a tea plant boiling water, when a breeze blew some leaves into the pot.

When he drank the infusion, he was amazed at its fragrance and how invigorated he felt. The emperor recommended it to his subjects, noting the beverage gave vigour to the body, contentment to the mind and determination of purpose . . . and the rest is truly history.

Yet, partly because of the depth of its history, the art of drinking tea has become somewhat lost amid the hustle and bustle of modern living. And it shouldn’t be this way, claims one tea expert.

‘Foreigners often pay more attention to our culture than we do ourselves, because we sometimes take things for granted,’ says Eliza Liu Tse-fong, chairperson of the International Chinese Tea Club and co-chairman of charitable organisation, Teaism Alliance Hong Kong. ‘Tea has a special place in our lives. You can find it at the most elaborate and grand ceremonies and you can find it at very casual gatherings so it is quite an intimate friend.

‘You can learn a lot from drinking tea. It’s not just a matter of brewing the tea; it also helps cultivate tastes and culture as well as improve dispositions.’

The Tea Club caters only to its 1,000-plus members and has a 200,000 square foot farm in Fanling where it cultivated its own strains of Hong Kong oolong and Hong Kong longqing.

The club also runs a tea shop in Mongkok (Jabbok Tea Shop, tel: 2761 9133) and holds regular tea preparation and appreciation classes for the public.

Liu is delighted that more youngsters are showing interest in learning the art of tea appreciation – the club’s membership is on the rise, as are the number of tea shops in the city.

‘When tourists go to Taiwan or Japan, they often remark on how good the tea tastes. I think it is time to show tourists that Hong Kong also has good teas,’ she says.

What makes a good tea, and what is the right tea for the right occasion? Although we may know what kind of wine we want with a meal, and from which country, how often have we walked into a Chinese restaurant only to be stumped when the waiter asks what tea we want?

Liu says it is not difficult to make a choice, if we know the basic teas as we do wines. ‘They’re quite similar cultures really,’ adds Liu, who learned the art from tea master Yip Wai-man.

‘When you think of wines, you think about the origin of the wine, the weather of the area it came from, and the different aromas. When you drink wine, you look at the colour, you smell it and then you taste it. The same thing goes for tea,’ Liu says.

Just as we might order different wines to accompany different courses, similarly, there is no reason to drink just one kind of tea throughout a meal. Liu advises that for most Chinese meals, it is better to start off with a light tea such as jasmine (heung pin) or a lighter blend of Iron Goddess of Mercy (tieguanyin).

‘Anything stronger might affect the taste of the food later,’ she says. However, at the end of the meal – especially a heavy one – a strong, heavier brew such as pu’erh will help with digestion.

Teas can cost anything from several dollars to several hundred dollars an ounce, but expensive tea leaves don’t necessarily guarantee a good drink. The art of brewing, water temperature and the kind of paraphernalia used play a vital role.

‘The person brewing the tea is very important. If you have someone who doesn’t know how to brew, it doesn’t matter how expensive the tea is. But if he or she does, then they can bring out the aromas even in cheaper teas,’ says Liu. The key is to look at what kind of tea one is drinking, she adds. Chinese tea comes in five main categories: black/red, oolong, green, white and scented. The most popular belong to the first three categories, except perhaps jasmine which belongs the scented family.

‘Different categories of teas are best brewed with different pots and served in different cups. Black teas such as pu’erh, for instance, are best brewed in the bigger pots and served in bigger cups so the aroma can escape better. You also need to use boiling water to get the full aroma,’ says Liu.

‘Oolong teas, such as tieguanyin, are already quite aromatic so you don’t need big cups for them. However, because their leaves are usually balled up and will expand quite a lot when they are brewed, it is best to use a deeper pot and water temperature should be about 36.6 degrees Celsius.

‘Green teas don’t expand as much so the pots used for brewing that is more shallow. Ideal water temperature for green teas is between 24 degrees Celsius and 26 degrees Celsius.’

While she speaks, Liu heats the water, then pours it into the leaves in the pot. After it brews for a minute, she pours the liquid into a large cup. From there, she divides it into smaller tea cups and hands them to those assembled, ensuring the first and last cups of tea are of equal strength.

While it would be ideal to have different pots for each tea we drink, Liu acknowledges it is impractical. Even with a normal mug and tea strainer in the office, one can still make a cup to tempt colleagues’ taste buds.

‘Just make sure the water temperature is right and make sure the tea isn’t allowed to steep more than a minute or so. After you make the first brew, you can cover the leaves and strainer to maintain its aroma. That way you can brew it several times.’

SCMP
Sunday January 14 2007

After 125 years, retailer considers turning over a new leaf
Enoch Yiu

Lessons from HK enterprises that have passed down generations

Sometimes you have to be willing to give up what you most cherish to let it thrive. This is as true for children as it is for businesses that have passed down through the generations.

That is why the current crop of Chans managing the 125-year-old Ying Kee Tea House have been mulling over whether to go public.

‘We have been lucky to be able to run the tea house for four generations, but we do not know if our fifth generation, which is still very young, would like to do it,’ says fourth-generation director Lawrence Chan.

‘If we are a listed company, we could modernise the structure of the firm and hire professionals to run it. In this way, we can assure the brand Ying Kee continues to run for a long time.’

To that end, the company, which sells about 6 tonnes of tea leaves annually, also plans to expand its overseas operations and update its business scope to include a younger, hipper clientele.

The oldest and largest tea leaf retailer in Hong Kong, with 10 shops in the city and two in Tokyo, Ying Kee was started in Guangzhou by Chan Chau-ying in 1881, in the eighth year of Emperor Guangxu, the penultimate Chinese emperor.

Now it is managed by its six directors, comprising two of the founder’s grandsons and four of his great grandsons, belying the Chinese adage that ‘wealth does not pass through three generations’.

Being a famous traditional brand means it has a stable of mostly elderly customers, but Wilson Chan, another director and cousin of Lawrence, who is also in his 40s, says plans are afoot to expand from a pure leaf retailer into a tea-drinking chain, where people can relax and enjoy the different brands of Chinese tea with dim sum or snacks.

‘We have many loyal customers who have bought the tea leaves for many years, but we would like to attract a younger generation of customers,’ says Wilson.

To overcome their lack of knowledge of restaurant operations, the cousins say they are now scouting for partners to work with them on the new concept.

Another big plan of the fourth generation is to expand into the non-Chinese market and onto the internet. In 2002, it set up a website, then last year, it opened two shops in tourist areas – one in Causeway Bay and another on The Peak – stocked with English brochures to explain the tradition of tea drinking and the six major types of leaves.

It has also held talks with potential agents in South Korea, where it hopes to reach a franchising agreement similar to the one it has in Japan, where its two shops are run by a domestic high-end food purveyor. ‘The same model of co-operation could be made in other Southeast Asian countries, and we think this would work well to expand the tea house in the region,’ says Wilson.

While the closely held company would not provide financial figures, Lawrence maintains it has managed to run a profitable business for most of its 125 years, with turnover of about HK$6 million during its annual two-week mid-autumn sale. ‘It is profitable enough to feed our family of more than 30 people,’ he says.

The innovations contributed by succeeding generations have been as much a key to Ying Kee’s longevity as its strong brand and the inherited knowledge of how to access and price the different leaves, says Lawrence.

Founder Chan Chiu-ying established three shops in Guangzhou set firmly on the rule that they sold only the best quality leaves ‘and would never compete on price’, he said. It was also the first tea house in China to advertise in a newspaper.

Chan Sing-hoi, the cousins’ grandfather, moved the business to Hong Kong in 1950, a year after the takeover of China by the Communist Party. ‘A key strategy adopted by our grandfather was to open branches and buy properties for the shops. Having branches around Hong Kong and Kowloon gave people the impression of our scale and imparted trust on our brand,’ says Wilson.

The third generation, which still shares control over the enterprise, continued the branch expansion plan and in 1988, accepted an invitation by Japan’s Kataoka to join its stable of imported luxury brands.

Ying Kee is certainly deluxe. Its most expensive leaf – 45-year-old pu-erh – sells for HK$20,000 per 600 grams. Its cheapest costs HK$48 per 600 grams, compared with the HK$20 you might pay for tea at a supermarket.

But being a family business has pros and cons. For one thing, it solves the problems of recruitment. Before joining the business, both Wilson and Lawrence worked in other industries for more than a decade – Lawrence at a ceramics factory in Nigeria, and Wilson in exports. In 2000, they both agreed to join Ying Kee upon the request of their respective fathers, also directors of the company.

‘The business was running well and our fathers needed help, so we came back to help them out,’ says Wilson. Coming to an established name meant they did not have to worry about the initial investment, brand building, or establishing a customer base. But it did create other challenges.

Some staff who worked for Ying Kee were much older than the new bosses and were reluctant to accept changes proposed by the younger generation, such as pre-packaging some tea in tins or gift wrapping it before it was sold.