A whiff of a freshly picked tea leaf can tease the nose. But 800,000 tea leaves? That's clearly serious business.

China's tea trade, enshrined in ancient customs and practices, was once a highly structured business that gave short shriff to the growers, who, of course, were at the bottom of the value-added chain.

My, how times have changed.

A quiet revolution, often perpetuated by local authorities in the tea-growing areas, has changed the nature of the industry, by empowering the growers, expanding the plantations and modernizing the processing and trading methods in the world's most-populous country.

Think about it: More than 100 million people, or nearly 10 per cent of China's population, work in the tea industry. Last year, China produced 799,000 tons of tea, of which 280,000 tons were exported.

In addition, the country has 1.27 million hectares of tea plantations, mainly in southern and western China. The acreage increases annually.

In some areas of southern China, "the economy is all about tea," says Wu Xiduan, secretary-general of the China Tea Marketing Association.

In many tea-planting areas, tea remains a cottage industry for hundreds of thousands of families, who sell their products to tea merchants. Because growers and processors are not organized, they lack the bargaining power to negotiate prices.

It is no surprise, therefore, that many young people in the tea-growing areas have moved to cities in search of better jobs and higher incomes. As a result, "many old and backwards tea plantations have closed," Wu says.

Wang Jiachuan, a tea grower in East China's Anhui Province, sum it best: "We are small growers with very little money. We can easily be wiped out overnight by a change in weather or other natural calamities. We have never been much of an industry."

What's more, the tea industry in China does not have a fixed, stable sales channel. There clearly is the need to modernize the tea industry in China, especially at a time when demand for better quality tea is rising, especially in the more affluent cities and coastal regions, Wu adds.

Production

Various local governments are implementing initiatives aimed at promoting regional co-operation among tea growers. During his recent visit to the Kuaiji Longjing tea co-operative, in East China's Zhejiang Province, Wu witnesses improvements that resulted from a better organized structure.

"The industry-wide association, large local enterprises and tea growers' co-operatives have gradually matured there," Wu says. He notes he was particularly impressed by the benefits of the joint stock co-operatives, which guaranteed stable incomes and provided the tea growers with financial assistance.

Tea enterprises in developed countries can obtain support from financial institutions, Wu says. But that was not the case in China until last year, when the local governments stepped in to help growers obtain bank loans.

In Zhejiang Province, for instance, the government provides seed money to local tea associations, which use the funds as collateral to obtain bank loans for tea growers.

Similar arrangements have provided needed financing to nearly every small grower in Simao, a city in Southwest China's Yunnan Province, which is the major production site of Yunnan Puercha.

Investments by large corporations have proven effective in the modernization of tea growing in China. More tea-growing areas have been opened to outside investment, including foreign money.

Many foreign investors are introducing new technologies and management to China's tea industry and, in the process, are helping change the traditional nation's traditional tea-production methods.

"I prefer being an employee of a big tea-production base rather than being a free farmer, as a result I do not have to be afraid of the unpredictable natural affection on tea plantation.

And I can enjoy the welfare and bonuses from my boss," says Wu Jinbiao, a young worker at a big tea production base in Zhejiang Province.

Sales

Malian Dao, widely regarded as the No 1 Tea Market in Beijing, which is to the south of the Beijing West Railway Station, has long been a hub of tea trading in the Chinese capital.

"Thanks to the government for building this tea market for the tea farmers and small and medium-sized tea enterprises. We enjoy a fairly cheap rent here, so we can offer the tea buyers wholesale prices, sometimes only one-10th of the prices in the department stores or supermarkets.

"The tea business here is really hot," says Liu Xiuxi, sales manager of Yixiang Tea Co Malian Dao Tea Market.

Business is so brisk, there often is no time to rest.

"Besides the endless stream of domestic buyers, I have to ship several loads of Yunnan Puercha to South Korea everyday. I don't even have time to sit down and enjoy a cup of my tea," the sales manager of Yunnan Jing Chang Tea Co Ltd tells China Business Weekly. He refused to give his name.

Setting standards

Regulations and standardization are important to the industry.

"The China Tea Marketing Association has set up 20 national key tea markets, and issued administrative regulations to standardize trading and promote development," Wu says.

The establishment of www.teanet.com.cn provides an extra source of tea-trading information and helps perfect the formation of a national, comprehensive market system.

"However, lack of famous brands is the biggest problem facing China's tea industry. Chinese tea can hardly stand on its own in the global market unless we build our own brand," Wu says.

"To build a well-known brand, it's necessary to increase the quality of the tea. But it's also crucial to improve industry management and sales.

Regional brands, not national and international brands, have flowed out of the different tea drinking practices and teas preferred by the different regions in China.

"It is very hard for small tea enterprises to produce various teas from the different regions. For instance, the people in North China prefer green tea and jasmine tea to oolong tea, which is consumed by the people in South China," Liu says.

"Most domestic enterprises are not capable of creating world-famous brands. The different processing procedures prevent the birth of a brand."

Now, in China, several senior tea companies are waking up to the need to build their brands.

With its symbol, which includes the words "Founded in 1887," Wuyutai's tea chain stores are recognizable on nearly every street in Beijing.

"Generally, big tea enterprises have two sales channels: Chain stores and sales counters in supermarkets. The chain stores are geared towards loyal customers; the sales counters, to the passers-by," an insider with a well-known tea firm tells China Business Weekly. She refused to be named.

"Compared with chain stores, the sales counters earn lower profits. But for the purpose of market share, the big tea enterprises have to continue operating sales counters.

"Branding promotion strategy is a top business secret for tea enterprises. I can't tell you more."

Tenfu's Tea is a prime example of the importance of brand building. The firm owns 478 chain stores in China, and one overseas store, in Vancouver, Canada.

"Chain stores undoubtedly are a key way to gain publicity when branding," says Wu.

Consumption

There is tremendous room for green tea, widely considered to be a health food, to develop. Green tea is the most common type of tea exported by China. In fact, 80 per cent of the green tea sold worldwide is from China.

During the SARS (severe acute respiratory syndrome) outbreak a couple of years ago, researchers at Harvard University discovered green tea helped strengthen people's immune systems.

German scientists have discovered green tea can help people reduce their cholesterol levels, and make people less susceptible to radiation.

Yunnan Puercha and Oolong tea, which have become increasingly popular in recent years, as they have a reputation for helping people stay fit, have been deemed to be marvelous oriental herbs by Western countries.

"Tea bags will develop rapidly in the future," Wu says.

"But in this field, it is difficult for domestic enterprises to compete with foreign enterprises like Lipton. Tea bags, especially black tea bags, have been in Western countries for centuries."

In the past, tea bags always contained the leftover leaves. Now, Chinese tea enterprises are putting quality tea in the bags.

Tea-related food such cookies, pudding and cake have become popular in recent years.

"But the food market is too big and full of competition. Tea food at present is mainly distributed in the tea stores and bakery stores," Wu says.

(China Daily 05/30/2005 page7)