Today's Tea Blog and Show Notes
I’ll be frank here and admit that I don’t particularly enjoy Twitter. It’s just not my thing. This podcast takes up time and I learnt from experience that managing social media is a job all on its own. I used to have, what was it, owl.ly, no….hootsuite, yeah hootsuite. That managed my Twitter, Instagram, and several other social media platforms I had. Yeah, sure, it saved time but it was still a lot to think about.
When I use my social media I like to customize my posts, make things worded a bit differently, add some flavor to the internet. Right now I’m using Instagram, Facebook, Patreon, LinkedIn of all things, and yes, Twitter. And it was here that I found the topic for this podcast from an unexpected question I received from some tea enthusiast in the UK. The question went as follows, “…..”. Now I’ve been involved with tea for several years now, I’ve traveled to several producing countries, worked with a few tea shops and their respectable owners, I’ve owned my own tea e-commerce site, I have a Patreon that delivers teas to wonderful people once a month, and I’ve a degree in international trade as well as business administration. I don’t want to toot my own horn but I feel I’ve got enough experience to weigh in on this subject.
This is the World Tea Podcast, I’m your host, TJ Williamson, and today we’re going to answer the question, “how do tea companies source their teas”?
So let me tackle the elephant in the room. I’m not here to openly discuss the proprietary knowledge of tea vendors and expose their sourcing locations, contact lists, and secrets. I’m simply not going to do it because I can’t. I don’t have that detailed of information. What I am going to do is openly discuss the following topics:
1. Who sources tea?
2. What is involved in sourcing tea?
a. When to order? - time
b. Payments of ordering? - transaction
c. Establishing the order? - relationships
d. Shipping the order? – shipping
e. Cost to order? - money
3. Where do those who source tea look for tea?
a. Trade Shows
d. Other vendors
I’ll mention now that, cost to order, I’ve debated this topic for some time now. And I am going to talk about it and here is my reason why: this podcast is first and foremost for my own passion and secondly for the people who enjoy tea. Tying those two together is an intricate and overlapping thread of similarities and one such is price. The cost of tea. As people who want tea, and especially the growing desire for “specialty tea”, I believe there should be a clear understanding for the consumer as to why they are paying a premium and where that premium comes from. So I’m going to, over the course of this podcast, tell you actual wholesale prices of teas that vendors pay. I’m not naming names of companies, rest assured there. But I can guarantee you that the prices I’m going to list are 100% accurate. How? Because I’ve got a pricing catalog from the most recent Canadian Coffee and Tea Show with me, it’s right here. So without further delay, let us answer the first of many questions: Who sources tea?
Who Sources Tea?
Well, many people. What did you expect for this answer? People who want tea are people who are going to go and get it. It is pretty damn simple. Now if I’m to expound on this it will depend on the size of the company. A small “mom and pop” shop will usually have the ordering done by the store owners. If the shop is a little larger, perhaps there is a manager who places the order. For a larger company, chances are someone has a position such as Procurement Manager or even Sourcer….who if they are smart just call themselves a Sorcerer….and it is their sole duty to make sure the teas come in. Now what I have just said is really basic stuff. There is a lot more depth to this answer and just hold on while we gently go down that rabbit hole. The last you want to do is trip and fall into a bunch of flesh starved rabbits….I obviously had some trauma as a child so let us go slowly here.
We’ve identified the person who is sourcing the tea: the owner or the manager, who may have a range of different titles, so I’m just going to say manager from now on. This sourcing could be as easy as picking up a phone, calling the contact (we’ll get into this later), and having the tea delivered. Or the sourcing could be much more difficult. Maybe an email has to be sent to the contact, maybe there is a time zone difference because the contact is on the other side of the planet. You start to understand how this is quickly going to spiral out of control and we haven’t even talked about leaving the country.
I’m going to back track a bit here and revisit the initial question, who sources tea. We’ve explained who does the ordering, but the sourcing, well it can be the same thing or completely different. I’ve approached sourcing from the standpoint of a shop owner who needs to fill her shelves full of leaves. Calling their contact and making an order is one type of sourcing. And so sourcing is going to take one of two different routes. Either the owner spent the time to research, order, sample, and determine which teas they wanted while at home (or work, in the shop, etc) or they spent the time to research, order, sample, and determine which teas they wanted while travelling abroad to a specific country or countries. I have a feeling that this was the spirit of the question posed to me on Twitter but I’m going to examine both options to give everyone a greater understanding.
If one is to source at home because traveling is simply too costly, time consuming, or perhaps the logistics and language barrier are insurmountable, well here are several options. First it is likely that in a digital age such as ours, many potential and established tea shop owners use the internet to find a lead. There are many tea distributors around who are part of an even larger supply chain. Yes, this impacts the amount of transparency in the product, but I’ll be damned if it isn’t convenient. A tea shop usually has to prove that they are indeed a legitimate shop and may have to provide proof in the form of a business or tax number. It is rare, but not impossible for an everyday layman to access these distributors, but even on the off chance you do, you may be faced with monthly or yearly minimums to maintain access to the wholesale pricing. This isn’t always the case but it does happen.
Another option is to purchase the teas from another vendor. This may seem crazy at first, but it most definitely occurs, I’ve seen it first hand in multiple industries. Perhaps one vendor offers a very unique tea or tea blend that another wants to sell or the demand for a certain tea higher in one area over another. This is where quantity comes in and when sourcing and ordering teas at wholesale you’ll need to purchase in bulk. It seems that for smaller shops (not the big companies like Starbucks or Tetley) whole sale amounts begin around half a kilogram or one pound and increase from there in size, but see a significant decline in price. A scale I frequently see is something akin to 1lb, 5lb, 20lb, 50lb, 100lb. Keep in mind a pound is 454g, just shy of half a kilogram. This is usually offered by American and Canadian wholesalers. The rest of the world deals in kilograms but this is even more confusing abroad where local weights and measure of the tea industry are still used and go by a host of names and sizes.
If the owner is sourcing themselves and travelling abroad, well this is much more complicated. Language and culture are huge barriers and can change very quickly. One simply doesn’t walk into a Chinese tea market or farm and start listing off their demands. Unless you are a returning expat or grew up in the region (ie. you know the language and culture) you’re going to have a hard time. One major difference you may notice is that negotiating and haggling for a price and amount are very common outside of North America. You better have your game face on and be ready for hours or even days of bargaining. You may even need to help of an interpreter so that is an additional fee. But who says the interpreter knows the language and business of tea? You will need to not only know what to bargain for but also where to find it and that is its own adventure. Back to the bargaining, be aware that you may even encounter discrimination on your sex or appearance. I’m not here to lament the horrors and injustices of the world but I will tell you that this happens and you may find yourself involved for better or worse. On the opposite side there are some incredibly friendly people out there and you may just get exactly what you want. Either way, sourcing by yourself is an immense undertaking requiring a heavy investment in time, research, relationship building, cultural understanding, industry knowledge, asking the right questions, appearing at the right season, knowing what you want and the quality you expect to receive. This is a great segway into our next topic, what is involved in sourcing tea.
What is involved in sourcing tea?
There are many steps to be taken here and I’m not going to list them all, partially because I cannot predict them all. But what I can do is list some important factors that someone who is sourcing must take into consideration.
I want you to keep in mind the differences and similarities that souring “at home” and “abroad” bring into play. To make this easier let’s explore the differences and similarities with respect to time, transactions, relationships, shipping, and money. This is again, a simplified comparative/contrasting analysis.
It is easy to forget that while we imagine sipping a well aged pu’er that it had first to be grown from a seed or cutting, was then harvested in one of many harvests over the course of a year, underwent processing, packaging, shipping, and likely aging. That is a lot of product specific time investment. Now remember that the persons who did all that lived on the other side of the world. From Toronto, Canada to Pu’er, China the distance is 12,615km with a twelve hour difference in time zones. A quick side note, did you know that China has only one time zone for the entire country? I find this rather interesting. Back to the point, that is a lot of time and so a lot of calculations for someone who is going abroad to source teas. You’ll need to know the weather for that year as it effects the harvest dates. You’ll need to know the time it takes to traverse mountains and plan for vehicle breakdowns. You want to go to remote villages? Best know who to contact, how long it’ll take to get there, where to stay, and when the farmers or the markets are available. Of course for aged tea you can always purchase older stock….if the villages have any for you to buy. Did you not know that you’re the only one sourcing? What chance do you have against a local procurement manger? Do you think you’ll get the good stuff? Now I’m not saying it is impossible, far from it. I just want to highlight the importance of time when going abroad to source. Tea is an agricultural product and it has a self life.
Compare this to the store owner who only has to pick up the phone and call their contact. Now they could have a contact overseas that sources for them. Or they could be sourcing from a distributor within their own country. Time is still a factor but the advantage is that most of that risk is avoided and on the distributor to mitigate, not the store owner. This comes with its own benefits and problems however. A store own may never get to taste the teas firsthand. Sourcing direct provides so much more insight into the product whereas a store owner may never get to taste or choose which teas they want.
But all of this takes time and running a business consumes a lot of it. The manager who stays home can focus on budgeting, marketing, accounting, local networking, social media, public relations, and get to know and identify their consumer base to form a strategic plan. Try doing that while abroad. You’ll certainly have a lot more interesting stories to tell, but your opportunity costs are very relevant. I can hear the rabbits chirping in this hole, you can see how intricate this gets. Let me summarize by saying that time is of the essence and it is crucial in what you allocate to it.
I’m not going to spend too much time on this but I wanted to highlight the importance of the transaction or the payments for ordering. At home this is much more likely to be a structured and orderly event. Now there are many types of transactions and methods of payments. A customer may assume that the tea shop places an order, pays the wholesaler, and then the wholesaler ships the tea. This is true, and it happens frequently, but there is a lot of risk involved and a diligent manager will know of other options and an Open Account would be far better. You see an open account reverses when the money exchanges hands. Instead of the tea shop paying and then getting the tea shipped. The tea is shipped and then manager may have between 30-90 days to pay. Wouldn’t it be great if you could order from Amazon now and not pay until 3 months later? What if the goods get lost in transit? You’re not out any many. If you had paid up front you would be. Now you have to go through the hassle of getting it all back. Yes, insurance exists, but its such a hassle to submit the claim and wait for the money to come back into your account. Running a tea shop involved this huge thing called cash flow, which is where the money is coming from and going to. A good manager knows their cash flow and can predict how much is flowing and when it will happen. The more control you have over this, the better position you have. A store that sources from home will often be in a better position than one who travels because less cash is going out to support the travel and these financial transaction methods exist and are enforced domestically.
Going abroad may have you paying up front in cash for the tea. Well what about the cost of converting money? Did you research a year in advance of your trip what the Renminbi was trading at in respect to your local currency? If you had converted your dollars in renminbi two months prior to departing perhaps you’d have saved a bundle as your currency was trading much higher. Remember that financial institutions in other countries will have much different rules in place. Is it better to open a bank account in China, Japan, India, or elsewhere so that your funds are more liquidable or easier to move around? Sending money by Western Union or another institution can result in very heavy surcharges that only damage your bottom line. Is there even a bank in a remote mountain village? Are you safe in carrying a sizable amount of cash around in a foreign country? These all play a role in your decision.
For the real savvy manager, you could consider a letter of credit, a very solid and robust tool which guarantees payment for the delivery of the goods. It is conducted through banks and is the most secure way for both parties to receive the cash and goods, but it often comes at a cost and there is a lot of paperwork involved. Ultimately the type of transaction used will depend on the size of the order, price, and the trust between both parties. Which brings us to our next topic, relationships.
Often a relationship is more important than the cost of the goods, the shipping, or the time involved in receiving the goods. A solid relationship is priceless. So being able to go abroad, connect with a farmer, plant manager, distributor, or producer can pay in dividends later on. Establishing trust between parties is critical and can result in access to superior product, discounted pricing, quicker service, and a wealth of other advantages.
To establish trust it is typically better to meet face-to-face, talk about the product, each other, your passions, lives, and goals. I’m painting some very broad strokes here and remember that different cultures perceive trust and relationships very differently. I’m not going to get into them vs. us, insider vs. outsider, individualistic vs. communal, high context vs. low context, or direct vs. indirect cultural norms. What I will say is that it would do you a lot of good to research and read up on this before going abroad. Knowing is half the battle. Of course, being able to speak the local language is infinitely advantageous and opens many doors to you. I know many people who travel abroad and are invited into the farmers houses for a meal or entertainment. Business can be discussed but often this can be considered rude. Relationships take time to build and may not become established until years after first meeting. Relationships take time and you must be prepared to diligently invest in them.
Someone who stays home also has the ability to create relationships. Do not think that retailers and their distributors do not connect and develop relationships. Meeting at trade shows for a face-to-face talk is a very wise activity to pursue but this may only occur once a year. Instead, calling the distributors over the phone works surprisingly well. Having a point of reference within your distributor’s company should be something you actively pursue and upkeep. Discounts, advanced notice or sales, and improved customer service are all dividends that result from this. I’m not saying it is guaranteed, but it is likely. Continued orders, on time payments, and a thank you go a long way in building a strong relationship.
I’m going to be real quick on this point as it will become too intricate once I get past the surface layer. Suffice it to say managers who stay at home typically only have to deal with a domestic distributor which makes things very easy. Or if they order from a distributor abroad, things become a little more complicated. Domestically, laws are easily enforceable and you are working with trusted and reputable companies. It is often much cheaper as well. To order abroad you now have to deal with customs (a lot of tea can get discarded or seized here, never to be seen again), international shipping, and even more complicated insurance. How is the tea getting to you? By boat? That is going to take a long time. By air? It is much quicker but the cost to ship is much higher. Likely a small tea shop is only ordering several kilograms at a time and so the cost to transport can be mitigated somewhat. Keep in mind that when sourcing tea this all has to be negotiated. A manager has to come into the deal knowing what they want to happen. Domestically you often are only left with a choice in courier and so you are at the disadvantage. Ordering internationally can afford some leeway here, but again, you need to know your logistics and transportation. Many companies will quote prices in FOB which applies to only tea coming by boat. If it comes by air, this trade term is meaningless and any dispute becomes a serious hassle. Though with orders for only a few kilograms this isn’t a large loss.
Sourcing abroad can make things interesting. You decided to go into another country and purchase some tea. Great. How are you getting it out? Are you carrying it out yourself? This is doable for several kilograms to be packed into your luggage, but if you are doing a large order….what now? Do you take the tea and give it to a courier yourself. Can you trust the courier? How do you contact them once you get home to see where the shipment is? Again it comes down to trust. Who is to say the courier wont just toss your tea and walk away with the cash. Are you getting the best deal and option? Is all the paperwork properly filled out? When does the money change hands? The questions go on and on and on and down the rabbit hole we go. Sourcing the tea is not just a case of finding it. There is much more complex issues at hand and I want to be sure to highlight this so everyone understands. Yes, it can be simple and as easy as delivering the teas to a courier for shipment, but in some countries perhaps not so much. You may have to order a certain amount before the distributor or farmer decides it is worth their time to even ship it. There is a lot more to this than what I’ve discussed so far, but I believe this gives a good oversight into what needs to be considered when getting your teas shipped. We can now finally cover our last topic, money.
What is the cost to order? I mentioned in transactions that it would be wise to consider currency conversions. And this is something I’ll leave you to study upon. Many countries do in fact take USD as a currency for payment over their local currency. It happens quite frequently and can prove to be very lucrative and more stable. However what I wanted to address here is the cost of the teas. What can you expect to pay as a tea sourcer ? Well it all depends. You have only to fly over to Japan to see one kilogram bags of hojicha for under $10USD. Meanwhile a 100g in Toronto will cost you just as much. Now what you should not be thinking is that you’re somehow getting screwed over. There is a reason why the 1/10 of the same tea costs the exact same. Well there are several reasons. Here are a few. The time involved to source the tea, to taste it, to have it shipped, an next the costs to package the tea, design the labels, print the labels, the cost of capital to store the tea, the variable and fixed costs of running a business that must be put into the product so that the store can exist. It frustrates me when consumers look at a product and immediately proclaim that the cost is ridiculous. In some cases yes, but for many it isn’t. A lot of effort goes into running a business and the fact is that many teas do not cost much money. Yes some do. Many variable come into play, was it a good season, what is the demand, is the supply high or low, are the products subsidized, what was the cost of labour, equipment, the farm overhead, etc. This is why many Japanese teas are far more expensive than Taiwanese, Chinese, or Indian teas, the cost of labour is that much higher. Now hojicha is not a premium tea by any means, often just roasted bancha and doesn’t command such a high price. But would you believe me if I said that a kilogram (2.2lbs) of Second Flush Darjeeling can cost at wholesale anywhere from $20USD - $50USD? That a First Flush Darjeeling can cost $12USD - $55USD. An orthodox Assam can put you back $11USD or up to $45USD per kilo. A kilo of CTC Assam can cost you as low as $6.50USD up to $10.50USD. These prices are for this year from a distributor out of Kolkata, do not include shipping, but offer an insight into what is available on the market.
Now not all teas are going to be priced like this. Remember that grade, location, renown, and a host of other factors play into the final cost. But it pays to do your research on the topic and have an expectation of what your sourcing capital will be and what your customers can afford and what it is they demand. Going abroad to source means you can barter these prices down, there is flexibility in travel, but the cost of travel has to be factored in to the end price. Are the teas being sourced worth it? Experienced tea shop owners will know what they want, how much they can spend, and how quickly they can move the product. Add in the fixed and variable costs of business operations and suddenly that tea is no longer looking cheap for the end customer compared to the wholesale cost paid, this is just business. Now if the tea shop owner could sell kilograms of teas to the customers, they prices would most certainly change, but this is rare and does not happen often enough as many patrons order in smaller more manageable increments. Tea shop owners know this and price accordingly.
Where do those who source tea look for tea?
Trade shows, distributors, farmers, and other vendors are the typical list of where one will go to find tea. As I have said, meeting face-to-face is always best and preferred. The World Tea Expo in Las Vegas is bustling on the show room floor as many managers who cannot travel talk to distributors and farmers one on one. Business brings people together and it is quite the sight to see. Excitement is in the air constantly. Aside from trade shows, which offer a convenient way to network, travelling to farmers or distributors abroad are all common sourcing methods. Staying at home and using the phone and internet as also ideal in their own way. Truth be told there are pros and cons to all methods of sourcing. It all comes down to the strategy employed and what the market conditions call demand and supply. It is a fascinating industry to behold and there are others like it. Tea is not alone in this. What I have discussed applies to numerous industries.
I’m TJ Williamson, this is the World Tea Podcast, an I hope now you all have a greater understanding for the efforts involved in sourcing tea. This information is of course incomplete. There is simply too much to discuss over a podcast. But if you want to talk more or have an inquiry, please be my guest and send me and email at tj @ worldtepodcast.com. If you’re too shy, no worries, I am also on Twitter, Instagram, and Facebook with the handle @worldteapodcast. I should not be too hard to find.
If you want to hear a specific topic discussed here you can join my Patreon and gain the ability to recommend topics. You can also get monthly tea mail and access to your own wholesale pricing. And now that you know how affordable it can be, well, perhaps you’ll want in.
I’ll be attending the Toronto Coffee and Tea Expo over the weekend of April 8th to 9th so if you’re in town please stop on by and say hello. I’m always happy to see fans of my work and talk tea.
Until next time. Keep those cups warm.