Why Are Matcha Prices Soaring Amid Global Demand?

Matcha, the finely ground powder of specially grown green tea leaves, has become increasingly popular in recent years, especially among health-conscious consumers. However, rising demand, coupled with tariffs and supply chain issues, is driving prices up significantly. In the UK and the US, consumers can expect to see substantial increases in matcha prices, particularly from Japan, which has traditionally been the gold standard for this beverage.

Last updated: 27 October 2023 (BST)

Key Takeaways

• Matcha prices are expected to rise 30% to 75% due to increased demand and tariffs.
• Japanese matcha production faces challenges from an aging workforce and limited tencha production.
• Chinese matcha is gaining popularity and improving in quality, presenting an alternative to traditional Japanese matcha.
• Health benefits and wellness trends continue to drive consumer interest in matcha.
• Specialty cafes are considering price adjustments to retain customers amid rising costs.

The Impact of Tariffs on Matcha Prices

For American consumers, the situation is compounded by tariffs on imported goods. Currently, imports from China face a 37.5% tariff, while those from Japan are subject to a 15% tariff. This has led to uncertainty regarding whether tea, including matcha, will be exempt from tariffs. The Trump administration previously exempted cork from the EU, raising questions about the future of tea imports.

Aaron Vick, a senior tea buyer at G.S. Haly, a California-based tea importer, reported a staggering 75% increase in the price of the highest-grade Japanese matcha crop for 2025. Lower grades are expected to see increases of 30% to 50%. While Chinese matcha is generally cheaper, its price is also rising due to heightened demand. Vick advises that matcha enthusiasts should prepare for a significant financial adjustment.

The Challenges of Matcha Production

Matcha production is a meticulous process that requires specific conditions for optimal quality. Farmers cultivate tencha, the green tea leaf used for matcha, under shaded conditions. The harvesting process is labour-intensive, and while tencha can be harvested multiple times throughout the year, the later harvests tend to yield lower quality leaves.

Although some producers may attempt to cut corners by using jet mills—high-pressure equipment that grinds leaves quickly—this method often sacrifices quality. Additionally, Japan's tea industry faces challenges, including a rapidly ageing workforce and reluctance among farmers to shift from traditional green tea to matcha production, fearing the long-term viability of the matcha market.

China's Emerging Role in Matcha Production

Historically, matcha originated in China but fell out of favour in the 14th century. Recently, however, Chinese matcha production has rebounded in response to both domestic and international demand. Although Chinese matcha was once considered inferior to its Japanese counterpart, its quality has improved significantly. Jason Walker, marketing director at Firsd Tea, noted that consumer perceptions are changing, with increasing interest in quality Chinese matcha.

Major brands, including Starbucks, have begun utilising Chinese matcha in their products, further legitimising its presence in the market. This shift is indicative of a broader trend where consumers are becoming more open to exploring alternatives to traditional Japanese matcha, spurred by availability and cost considerations.

Consumer Trends and the Future of Matcha

According to Josh Mordecai, supply chain director for Good & Proper Tea in London, demand for matcha has surged over the past year, surpassing the previous nine years combined. However, with rising prices, there are concerns about whether consumers will pivot to other tea options, such as hojicha, a roasted Japanese green tea.

Julia Mills, a food and drink analyst at Mintel, predicts that while social media interest in matcha may wane, its appeal will endure, especially among health-conscious consumers. Matcha is known for its high antioxidant content and the calming effects of l-theanine, making it attractive to Millennials and Generation Z, who are more likely to have tried it compared to older generations.

The Ritual of Matcha Preparation

The traditional preparation of matcha—whisking the powder with hot water in a bowl—also appeals to consumers seeking a mindful and intentional drinking experience. For many, such as Melissa Lindsay from San Francisco, matcha is not just a beverage but a daily ritual that enhances their routine. Despite rising prices for her preferred high-end matcha, Lindsay believes that her commitment to the experience is worth the cost.

Strategies for Specialty Cafés

As the price of matcha rises, café owners are seeking strategies to maintain customer loyalty while managing costs. David Lau, owner of Asha Tea House in San Francisco, has raised the price of his matcha latte by just 50 pence, a modest increase considering the price of his matcha has more than doubled. He is also exploring alternative suppliers, including those from China, to keep prices manageable.

Lau emphasises the importance of remaining accessible to customers, stating that once prices reach a certain level, it risks alienating regular patrons. This sentiment is echoed by other café owners who are navigating the balance between quality, cost, and consumer expectations.

Conclusion: The Future of Matcha in a Changing Market

As the matcha landscape evolves, consumers and suppliers alike will need to adapt to the shifts in pricing, sourcing, and production. Whether the increased demand for matcha represents a sustainable trend or a temporary bubble remains to be seen. What is clear, however, is that matcha's reputation as a healthful beverage is deeply rooted in consumer consciousness, and its future may depend on how producers and cafes respond to these economic pressures.

With the growing popularity of matcha and the challenges tied to its production and pricing, it remains to be seen how consumers will navigate their choices in the coming months. Will they continue to embrace this vibrant green tea or shift towards other alternatives? Only time will tell. #Matcha #TeaIndustry #ConsumerTrends

FAQs

What causes the rise in matcha prices?

Matcha prices are rising due to increased demand, tariffs on imports, and challenges in production, including an ageing workforce and limited supply of high-quality leaves.

Is Chinese matcha a good alternative to Japanese matcha?

Yes, Chinese matcha has improved in quality over the years and is becoming a viable alternative to Japanese matcha, especially as demand increases.

How is matcha traditionally prepared?

Matcha is traditionally prepared by whisking the powder with hot water in a bowl, creating a frothy beverage that emphasises mindful consumption.

What health benefits does matcha offer?

Matcha is rich in antioxidants and contains l-theanine, an amino acid known for its calming effects, making it a popular choice among health-conscious consumers.

How can cafés manage rising matcha costs?

Cafés can manage rising matcha costs by exploring alternative suppliers, adjusting prices modestly, and being transparent with customers about the reasons for price changes.