Selling habits of tea producers

[Drax]

Does a large company like Dayi hold on to any of their finished product at all, to sell at a later date? Or do they sell it all when it's produced at a fixed price?

For example, would they withhold from the market some of their 2012 7542 cakes, and sell them at a later date? Does anybody do this?

I think the most similar that I've seen is when a company makes a "new" product from old mao cha -- so they might release a "new" product in 2012 from a tea harvested in 2005... but that seems different from pressing a cake in 2005, and then selling it in 2012.

This was just one of those random questions that popped into my head for some reason...

[shah82]

They certainly do from spring to fall of the same year. Multi-year? Dayi blends tea from maocha they store, and not bings. Some shu is stored a year or more before being released. Virtually no teamaker can truly afford to intentionally store large amounts of finished products for any length of time. Dayi and Xiaguan can do it in maocha terms because they have paid for plantations and warehouses. They also have blendmeisters to maximize the value of leftover leaves from previous years.

[apache]

I did think about this, why don't they like Scott whisky distilleries have the tea mature for say 12 or 18 years and sell it?

I hope someone with more knowledge will shed some light on this, but
my guess is:
1. tea producers need to turn the money around quickly
2. keeping huge amount of stock costs a lot of money in rent and management. Stock need to rotate in storage twice a year. With hundreds of thousands boxes (6 or 12 tongs per box) and let say only cost US $0.5 to move one box, it still cost a lot of money.
3. Risk involve like fire, flood, theft, pest and market price movement. Not all teas will increase in value in good amount, e.g. last few years 8582, 7542.

These just some I could think of.

[AdamMY]

I did think about this, why don't they like Scott whisky distilleries have the tea mature for say 12 or 18 years and sell it?

I hope someone with more knowledge will shed some light on this, but
my guess is:
1. tea producers need to turn the money around quickly
2. keeping huge amount of stock costs a lot of money in rent and management. Stock need to rotate in storage twice a year. With hundreds of thousands boxes (6 or 12 tongs per box) and let say only cost US $0.5 to move one box, it still cost a lot of money.
3. Risk involve like fire, flood, theft, pest and market price movement. Not all teas will increase in value in good amount, e.g. last few years 8582, 7542.

These just some I could think of.

For one, it's puerh basically since it was processed, but depending on the country it can not be called a Whisky until its aged for a certain length of time ( 3-6 years depending on the country of origin). In reality all but relatively few distilleries sell of large portions of their stock while its still incredibly young ( though those that buy it may still hold the casks and age it), so its not quite like distilleries get no income for the first 10 years of production. Especially since quite a few often in the early years also make gin or vodka, or do special releases of spirit that can not quite legally be called whisky yet, to get some income.

Another parallel would be to consider Wine, while I do not have numbers on this, consider the fact that very high quality wines are considered to have great aging potential, often needing to sit for 5 if not more years before it is best. Yet very few wineries ever hold onto large batches of bottles for the sole purpose of aging them. They tend to get put on market rather quickly. Though wine is a bit odd as with red wine its not uncommon for bottles to be released 3 or so years after its vintage, but who knows how long after bottling.

I really think it's because it is hard to firstly get a business off the ground, and secondly it assumes far to much risk, when it has the business model that it doesn't sell a product for many many years until after it is made.

[David R.]

As for the wine comparison, there is no skill required to store wine. One just has to keep it away from the light and at a constant given temperature. Electric wine cellars do that for you very well. I wish they had those for puerh...

It seems like more and more people do invest in wine because of this. If you know what to buy, it is going to lead to a serious income in the long run.

Sorry for the slightly off topic comment.

[apache]

Oops! I only used whisky as an example causally without much thought, also I was thinking big factories like Dayi or Xiaguan, not small producers. I think it would be better stick to the original question about why producers don't store large amount of newly pressed pu cakes instead.

[MarshalN]

Well, there's a simple reason

Why should they? People WANT to buy new ones and age it themselves. So let them.

Whisky, when raw and un-aged, is not whisky, it's just distilled alcohol. It's only whisky after it's been sitting in a barrel for years, soaking up the flavours from the barrel. Once bottled, it's no longer aging - your bottle of whisky from 10 years ago doesn't have 10 more years of aging, whereas for wine and tea, they do age, whether you like it or not.

So whisky makers have to age it themselves, unless you want to buy your own barrels. They also have to blend the barrels to create the finished product, unless they're making single barrel batches. Again, tea and wine behave differently and I think people enjoy the aging experience, among other things.

[Drax]

Why should they?

Profit.

Retailers seem to raise their prices on old tea at anywhere from 10-30% each year. I'm surprised that tea producers haven't tried to tap into that return. I suppose it might be because they actually have a better profit return on new tea; if that's the case, then it would make sense that they want to maximize sales of new material.

[MarshalN]

Well, there are costs to storing all that tea, and also, by giving the retailers that profit margin, they gain free promotion/sales network that they otherwise won't have. Unless the factory tries to set up a direct-sales network, but that's a real pain.

[apache]

Are those Dayi specialist shops around whole of China are Dayi direct-sales network?

[MarshalN]

No, they're all contractors owned independently. AFAIK Dayi doesn't have their own stores. From what I understand even at tea expos the booths are run by the local Dayi reps.

[TwoDog2]

No, they're all contractors owned independently. AFAIK Dayi doesn't have their own stores. From what I understand even at tea expos the booths are run by the local Dayi reps.

This is also my understanding. Their reps are all agents for their brand. If they sold directly, it would undercut their reps and discourage others from selling their brand, unless the pricing was identical

[Bad Jedi]

No, they're all contractors owned independently. AFAIK Dayi doesn't have their own stores. From what I understand even at tea expos the booths are run by the local Dayi reps.

Not everywhere ,at the Guangzhou Tea Expo they showed up by themselves accompanied by local reps, i can't tell you that happens every time... I've been there only once .

I'm assuming Dayi sends reps to very important shows, especially when it comes to Guangzhou tea expo.

[MarshalN]

Yeah, the Guangzhou one they might send a factory big wig or two, but that's the Guangzhou expo and maybe a few others (Beijing, Kunming...). I believe the cost of the booth, most of the staff (the tea brewing girls, the sales) are all local people.