Thursday, March 18, 2010

Private Label Teas

The idea of a private label tea sounds reasonable: a company sells tea that can be packaged and given a brand name of its own. It makes a lot of sense for restaurants, hotels, spa's, and any other businesses that wish to sell their own brand of tea, but either aren't knowledgeable enough in the tea market to source directly, or simply don't want to take on this added responsibility.

However, there is an ugly side to the phenomenon of private label teas.

The Tea and Coffee Trade Journal has an excellent article on this subject, by Randy Altman, titled "The Secret and Lucrative Private Label Tea Market" (from 2007). The private label business is a secretive one, especially when the source company also sells directly to individuals: any company selling such private label tea needs to hide the source of their tea, for if the customer found out, they could purchase the tea directly from the source. The customer might also feel cheated, especially if the markup were too high, and this could harm the company's loyalty--including in areas beyond their sales of tea (which might not be a main source of revenue).

Many providers of private label tea solve this problem by only selling wholesale. However, the markup is still high--it's just now even more effectively hidden from the customer. Nothing has changed; it's only harder for the prices and markup to be spotted.

Economic justice?

In addition to the question of a fair price for tea drinkers, there is a very ugly economic justice aspect to private label tea: the extra profit generated by the markup in this extra step is pocketed solely by the companies buying and selling the private label tea--it typically does not "trickle down" to the original producers. M4Pnetwork.org's 2008 Sustainability in the Tea Sector report identifies as one of the major sustainability issues facing the tea industry the fact that producers earn such a tiny share of the profits from tea, whereas the company engaging in the last step, selling to the customer (in this case the company selling their own private label) earns the lion's share of the profits. In a sense, it's the opposite of the goal/principles of fair trade, which boils down to the idea of cutting out middlemen and ensuring that the price paid by the end customer reflects a fair living wage paid to the original producer.

By buying private label tea, you're effectively making the rich richer and keeping the poor poor.

What can be done about this?

Fortunately, there are easy solutions to these problems! Buying from companies that source directly (like Yunnan Sourcing or ) not only gets you a better price--you're getting the full value of what you pay for instead of just lining someone's pocket's--but, especially when you buy fair trade tea and/or tea sourced directly from small farmers (especially from farmer-owned companies like Obubu Tea), you're empowering the producers. Many companies, like Rishi Tea, take a multifaceted approach, working with fair trade and organic certification, and engaging in other sustainability-promoting initiatives. Equal Exchange also goes above and beyond the standard fair trade certification to work for economic justice. And Shanti Tea not only works with fair trade and organic producers, but is committed to biodynamic agriculture as well.

These are only a few of the many companies out there and many more are doing similar things; apologies to any I have omitted! Ultimately, these approaches result in a better quality product. Empowered producers have the resources for both preserving and developing new local tea cultivars, varieties, and traditions.

So what to do?

I would hardly suggest boycotting companies that sell private label tea...their ranks include Harney & Sons, SpecialTeas, and a number of other companies that sell directly to the consumer. But a good solution is to buy directly from these companies, rather than buying from companies reselling their teas for a higher price. Also, knowing the market can help you make wise purchasing decisions. As Marlena of Tea for Today pointed out in the comments, in some circumstances private label tea can actually be priced below the prices offered by a supplier, and this can represent a great opportunity. It's always important to be price conscious when shopping for tea--but it's also important to know how the company you are buying from sources their teas. If you're going to pay a premium, make sure you're paying for quality, and make sure that money is going to be put towards ensuring future generations will be able to enjoy diversity and quality of tea, rather than just allowing your money to go towards lining someone's pockets.

8 comments:

  1. I am very proud of my local tea merchant whose teas are private label, but they are priced lower than the supplier has them on line, despite the supplier urging them to price highter!

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  2. That's good news, and I hope people reward this merchant with their loyalty!

    This proves that you don't necessarily save by buying directly--sometimes resellers can be less expensive! I guess that's why it's important to shop around and know the market!

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  3. This is a very thoughtful discussion! Should tea be brand-named? I've thought about this question for a while. What makes tea very different from coffee and caocao is, tea is finalized in hands of tea farmers, while coffee and caocao are often roasted or processed by carrier companies. Tea sellers don't do much value adding work on tea (flavored tea blends are exceptions). So I share your concern about private label tea. Currently some important Chinese tea regions give their local farmers geographic license. I am curious to see how this develops. Maybe some day, many tea products can be labeled with tea farmer's license numbers. Or maybe it's just my naive thought :-p

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  4. These are very interesting questions, Gingko...I've thought about this a lot because the brand of tea is central in how I've organized RateTea.net. But in certain cases, the brand is less important--for example when different tea companies sell the same batch of tea from various tea estates.

    I haven't done so yet, but I'm planning on listing individual estates / tea gardens on RateTea.net's region info...this way you could compare teas from the same estate provided by different companies. There is some degree to which the brand matters in these cases--packaging can differ, and thus freshness. Price (and thus value) can differ, and it seems reasonable that people would prefer the same tea from one provider over others.

    In the case of pu-erhs, I list tea factories (like Menghai) as brands, not the importers that resell them. This makes sense I think because the teas are packaged and labeled as Menghai. I could see things moving in this direction for tea gardens / estates in other regions too.

    I don't think that's a naive thought that you brought up about license numbers and fine-tuned geographic details. Quite to the contrary, I think it's a neat idea and I think things are already moving in that direction.

    Actually, part of the purpose / goals of RateTea.net is to move things in this direction...I've been progressively adding more and more detail in the tea-producing regions listed on the website and I don't plan on stopping any time soon!

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  5. Really like this post. Have often considered this and didn't know what I could do.

    You've given me some good options.

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  6. This is a great discussion! I have had many of the same questions as have been posted here. Recently, I bought some anxi benshan oolong from enjoyingtea.com for my tea tasters board. I personally really liked the tea so I had a vendor in China send me some for my own stash. I realize that while the 2 teas taste similar, one has an after taste that really sticks with you and it is the tea from China. I have sooooo much to learn yet in this industry. I hope I will be meeting you all at the World Expo!

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  7. Back when I started selling tea (almost 9 yrs ago) I was taught by my former boss to be "proprietary" (read: secretive) about our vendors. That was the old school and I believe it was the most common attitude to have among North American tea sellers prior to 2000.

    In the years since I have watched first hand as the North American tea scene grows exponentially from year to year!

    I'm still very proud to work for that same busy retail tea shop (the teacup in Seattle) and we still import some teas direct, blend some teas in house, and resale lots of tea from other domestic vendors. All of which is re-branded and sold as "Teacup's tea." The only difference is that for many years now I will happily tell anybody who asks the exact story of how a tea came to be sold in our shop. Customers deserve to know if their tea is available at other places so that they can compare costs. Plus, quite understandably, being open and honest in any business makes your customers like you more!

    So... that old-school tea seller philosophy of "proprietary information" does not belong in today's well-connected and truly international tea industry! I thank you Alex very much for this awesome post!

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  8. It's really encouraging to see how tea companies are moving more towards openness!

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