Japan’s Tea Industry is Still in Post-Covid Recovery Mode

Since the first Covid-19 patient (a returnee from Wuhan, China) was confirmed on 15 January 2020 in Japan, the country has been affected by the disease tremendously in many ways similar to other nations in the world. From December 2022 to January 2023, the country suffered from the so-called eighth wave of increases of new cases together with the spread of seasonal flu. However, factoring in the advances in vaccinations and the world’s infection situation, the government announced that it would downgrade the Covid-19 contagion to the same level as seasonal flu beginning 8 May 2023. The change of the policy implies no more restrictions of people’s movement or activities would be requested by the government there after.

During the most serious spell of the pandemic from 2020 to the first quarter of 2022, Japanese green tea production, domestic consumption and exports showed only temporary changes and the overall trend in the past decades recovered in a short period of time.

Japan produces steam-type green tea mainly, and the national production has been gradually decreasing in the last two decades according to the statistics of the Ministry of Agriculture, Forestry and Fisheries (MAFF). The total yearly production has maintained between 80,000 to 100,000 metric tonnes (mt) in the same period except in 2020 and 2021 when production dropped to 69,800 mt and 78,100 mt, respectively.

“The main harvesting season in Japan is from the end of April to May, when the best quality tea is manufactured from the first flush of the year. While some farmers pluck the spring flush only, others harvest leaves several times till October, and those second, third and autumn/winter teas are well-accepted as ordinary quality tea. Consequently, Japanese green tea producers can adjust their crop yield by reducing or increasing the number of harvesting times,” explained Osami Moriyama, managing director, Japan Tea Central Public Interest Incorporated Association. “Additionally, tea can be stored for a longer period of time and the increased stock will become an additional supply, which tends to suppress demand resulting in a drop in prices. This is the main reason for the sudden decrease in 2020, but it could have bounced back by 12 percent from the existing tea field in 2021.”

The first ever State of Emergency was issued nationwide in April and May 2020, however, it didn’t intend to discourage the agricultural sector. Therefore, the spring flush tea was manufactured as usual, but it seemed many tea farmers predicted the shrink in demand and reduced later harvests resulted in the decrease of the total crop of the year.

Moriyama said that Japanese tea farmers are facing an aging problem and shortage of successors over the years, which is causing the increase of abandoned tea fields. “[However], tea bush can produce leaves for several decades and it is possible to store made tea without deteriorating in quality for a longer period of time if it is kept under air-tight and cooler conditions.” He added that these are the differences between fresh vegetables and tea. “Therefore, the impact of the pandemic on the tea industry was rather limited and it could get back on track quickly.”

Covid Minimally Affected RTD Sales

One of the significances in Japanese green tea consumption is, about one-fourth of green tea is drunk in ready-to-drink (RTD) form, which has steadily increased since its launch in 1985 when ITO EN put the world’s first canned green tea on sale. While RTD tea has more or less maintained its sales during the pandemic, demand for leaf tea rose sharply in a short period time when ‘staying home’ was strongly recommended. In addition, consumers buy more tea through internet shopping which grew from 9 percent of all green tea purchases in 1999 to 15.1 percent in 2020 per MAFF. Although there is no clear data, it seemed that the restrictions of going out of the house encouraged consumers to order any sort of food and goods online.

Japan’s tea production, imports and demand Source: MAFF

Green Tea Exports Surge

Japan’s green tea export has expanded in recent years, especially, the demand for organic tea and powdered tea including matcha continues to be strong. In 2021, Japan exported 6,179 mt of green tea in total, of which 3,155 mt or 51 percent was leaf tea, and the remaining 3,024 MT or 49 percent was powdered tea. The main export destinations for organic green tea are the United States, the European Union and the United Kingdom. In 2021, Japan exported 2,254 mt of green tea to the US, of which 1,628 mt or 73 percent was powdered tea, and 604 mt or 26.8 percent, was Japanese Agricultural Standard (JAS)-certified organic tea. Meanwhile the EU together with the UK imported 834 mt of Japanese green tea, of which 646 mt or 77.4 percent was organic. The EU only imported 775 mt of Japanese green tea, comprising of 467 mt or 60 percent of leaf tea and the rest 307 mt or 40 percent of powdered tea per MAFF.

Not only the Covid-19 outbreak but other various factors are now influencing the tea industry, such as the rising cost of fuel, electricity, fertilisers, packaging materials, transport and so on, triggered by the Russia’s invasion to Ukraine in February 2022. The sharp depreciation of Japanese yen against US dollar has been affecting to the nation’s overall economy. All those factors are lessening the profitability in the tea trade.

“The Japanese tea industry has more than 800 years of history and has created its unique culture over the centuries. We pay the utmost respect and place importance on this heritage,” shared Moriyama. “However, we shouldn’t stick to the past and need to accept the latest trends which might be considered a wrong path by previous generations.” He added, “If we do nothing, the tea market will not grow in the years ahead. We will need to find ways to provide Japanese tea that meets the requirements or preferences of younger or overseas consumers.”

A leading Japanese green tea brand and the largest RTD green tea manufacturer, ITO EN, experienced a 10 percent growth in leaf tea sales in early 2020 during stay-at-home restrictions. Large size boxes of tea bags met a good demand. While RTD green tea decreased in the same period, it has been recovering since 2021. Export of leaf tea has grown steadily in spite of the pandemic and the sudden surge of sea freight in the last few years. Akihiro Murase, public relations officer, ITO-EN, said “We established the new medium-to-long-term business plan in June 2022. One of the key strategies is to globalise our Oi Ocha brand products. We will try to familiarise the Japanese tea culture, not only to the North America but also throughout the world.”

Japan’s Lesser Known Black Tea Market

Approximately 90 percent of black tea marketed in Japan is imported from four countries; roughly 40 percent from Sri Lanka, 20 percent each from India and Kenya, and 10 percent from Indonesia. A trade association for black tea, the Japan Tea Association (JTA), focuses on imported black tea and promotes its healthy market growth along with government authorities, embassies of major tea-producing countries as well as its 50 member companies.

“Japan’s black tea import had remained stable more than a decade, between 16,000 mt and 17,000 mt a year until 2021,” said Kohei Akiba, managing director of the JTA. However, the import quantity from January to October 2022 showed a decline of 87.1 percent compared with the same period in the previous year, decreasing from 14,297 mt in 2021 to 12,448 mt in 2022 according to Trade Statistics of Japan, Ministry of Finance. In addition to the Russia/Ukraine war, it appears that the Sri Lanka’s political and economic turmoil, which intensified in 2022, has started to affect the Japan’s black tea market. Sri Lanka’s annual tea production in 2022 ended up at 251,499 mt, a 16 percent decrease versus 2021 and the lowest since 1995 when the country produced 245,900 mt per the Sri Lanka Tea Board.

The total value of imported black tea in the same period increased from JPY 9.8 billion in 2021 to JPY 11.1 billion in 2022 or 113.1 percent. “It was caused by the price hike of black tea in producing countries. Besides, the depreciation of the Japanese yen in the foreign exchange market is having much impact,” said Akiba. The Japanese yen has started to fall sharply since March 2022 when one US dollar traded at around JPY 120, then hit JPY 150 in October for the first time in 32 years.

Those unfavourable business circumstances that followed the Covid-19 epidemic have continued for some time. The JTA, however, didn’t suspend most of their black tea promotional efforts including seminars, trainings, various black tea-related events by taking cautious anti-infectious measures in the last three years. Moreover, they are considering new activities such as special iced tea promotions to further expand the black tea market in the country.

Japan’s Coffee Market Holds its Own During Covid

Coffee is supposed to be the most affected non-alcoholic beverage together with the dining industry when restaurants and cafés were requested to restrain operation or shorten opening hours to curb the spread of the Covid-19 infection. “Obviously, the wholesale of coffee to the catering trade had plunged in a certain period time. Also, many note that when most cafés were closed, coffee lovers shifted to enjoy more cups at home,” said Seiichiro Oyama, executive director of the All Japan Coffee Association (AJCA). “In addition, consumers were required to buy more coffee online when they stayed home to keep themselves safe from the disease. However, the available statistics do not clearly show these changes in sales channels or consumer habits.”

According to the AJCA’s statistics, based on the Trade Statistics of Japan, Ministry of Finance, and the AJCA’ survey, Japan’s domestic coffee consumption had shown a steady increase to 470,213 mt in 2018. However, it had decreased for three consecutive years; 452,903 mt (2019), 430,719 mt (2020) and 423,706 mt (2021). The estimated figures from January to October in 2022 showed an increase of 1.1 percent to 363,719 mt versus the same period in 2021, which was 359,713 mt. “Coffee consumption in Japan was likely affected by the pandemic to some extent. However, the decrease started in 2019, which was before the spread of the infection, and the slight upturn in 2022 was not sufficient to return to pre-pandemic levels. Therefore, not only Covid-19 but also other factors may have been affecting the coffee market”, Oyama commented after carefully analysed the trends.

Japan’s tea production and area under tea. Source: MAFF

Other consumer surveys conducted by the AJCA indicated that the volume of regular coffee and home consumption increased significantly in 2020. Whereas instant, liquid, single-serve and decaffeinated coffee products have more or less maintained their current sales trends. Oyama said the coffee market is becoming more diversified, so coffee companies need to offer products that meet consumer demand. “Furthermore, public interest in the health benefits of coffee, the sustainability of the coffee industry, and the recycling or reuse of used coffee grounds has grown noticeably in the last few years,” he shared.

Most of coffee consumed in Japan is imported from Central and South America, Africa and Asian countries located within the ‘coffee belt’. Meanwhile some Japan’s southern-most islands are situated at the northern limit of the coffee belt, and have been producing coffee nearly half a century, although its volume is limited and the cost of production is much higher than major producing countries. In addition, some international coffee companies have started to become involved in coffee production with the cooperation of local farmers in recent years. Oyama encourages those movements, noting that “geographically, Japan cannot become one of the main coffee producers in the world. However, its coffee can be marketed as one of the specialties in the region, and hopefully provide a new joy of coffee for connoisseurs.”

  • Yumi Nakatsugawa has been working as a freelance writer specialising in food and restaurant management. While freelancing, she developed a love of black tea as well as tea-producing countries and tea people. Her passion for black tea has brought her to Sri Lanka, India, Kenya, Indonesia, Nepal, Malaysia, and Papua New Guinea to see tea production firsthand. Based in Japan, Yumi may be reached at: [email protected].

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