Priced for gifting

Lew Perin, maintainer of Babelcarp and, I think, longtime reader of this blog, asked me a few weeks ago about a curious cake he saw on Taobao. His question was basically “does anyone actually buy these things? And are they that stupid?”. The cake in question, in case you’re wondering, is currently priced at 3888 RMB (although at the time I think it was 9999, if member serves). The tea is supposedly Youle mountain tea, produced in 2005, so maybe 7 years old or so. If we believe all of that, and if it’s truly old tree tea, the value of this cake maybe 1000 or so, but who knows. There are, after all, no pictures on the wrapper.

There are catches though, of course. The first is that this cake has slight religious meaning – it’s “made by Longchang Hao, produced by the Shaolin temple”. Yes, that Shaolin temple (which also explains the yellowness). What’s better, I found a cake that is similar, only with the signature of the abbot of the Shaolin temple, and this one was selling for 99999 RMB.

Back to Lew’s original question – why do these things exist, and who’s buying them?

I think the simple answer is – gift, gift, and gift. Basically, these things exist as gifts for the high and mighty of the Chinese bureaucracy and business world. Now, this cake is a little “special” because of its religious meaning, perhaps, but one doesn’t need to look very far or hard on Taobao to find similarly priced cakes that aren’t made by the Shaolin temple. Basically, these things are used as gifts to grease the wheels of business. The way it used to work, of course, was through gifts of cash. That ship, however, has sailed. Nowadays, gifts of cash are often refused, because it’s too obvious and hard to hide. Conspicuous gifts of luxury are often not that impressive for the official who already has all the latest watches and bags. So, enter tea and other rare things.

A friend in Dongguan recently described it to me like this – these days, those looking for gifts don’t just want anything expensive. After all, they can buy it themselves. These days, they want something unique, something that other people don’t have. Roughly following Bourdieu’s ideas of taste and cultural capital, in a society where an increasing number of people can afford Louis Vuitton bags and BMWs, it is important for those in the upper crust to find something that keeps them apart from the rest of the pack – something to distinguish themselves. Gifts of a rare, hard to find, and impossible to procure nature will easily do that.

So, in terms of tea, what we’re seeing these days is exactly a reproduction of this type of dynamic, driven by the demand of a market that is increasingly segmented into different layers. These days, even older teas such as Red Label are not that hard to find, if you have the money. Buying things like this is only a matter of wealth, maybe coupled with a few connections that help you find the “real” ones instead of the fakes. But if you have the ability to splash out 100k RMB, you can find something of that calibre without too much difficulty.

However, it is difficult to find certain kinds of things, such as, say, true current year first flush Lao Banzhang from old trees. Such teas, given the limited amount that is produced, tend to be secured long in advance by the powerful, and sent up as gifts to those even higher up. You can easily imagine, for example, of how a local administrator in Xishuangbanna looking for a promotion might use his pull to make sure the village head of Lao Banzhang saves him 10kg of these teas. He keeps maybe a little bit for himself, and then sends the rest up to people in the provincial party hierarchy, or maybe even in the national bureaucracy. The best tea, in other words, never see the market at all. The ones that see the market end up commanding high prices. Even if they’re not really worth all that much, their supposed rarity help the perceived value of these teas. In fact, they become Veblen goods and the gift-giver only needs to point out that “this tea costs 10000 RMB on the open market” and all of a sudden, everyone understands that this was a substantial gift. This explains why jinjunmei, an otherwise decent but utterly unremarkable black tea, was selling for something like 20k RMB per 500g.

Shops like the ones I visited in Dongguan are also, I think, largely driven by the gift market and the connoisseur market. They are related, but not identical. The shop owner was, according to the shop keeper anyway, a factory owner who was relatively successful. Having cashed out of his business, he turned to tea, but I think his business acumen still remains. He knows, for example, that in a city like Dongguan where there are many businesses vying for contracts as well as needing to make things run smoothly, there is an acute demand for gifts that help things moving. It was no surprise that in the area near where my hotel was, there were lots and lots of tea and alcohol shops selling high end tea as well as high end French cognac. These things are prized by the middle managers and that type of thing, so again, creates a market for this type of good.

My friend L in Beijing told me that his shop once received an order for 100 cakes of cooked puerh, each worth maybe 50 RMB. He was told to get the nicest looking packaging possible for the tea, and then deliver the goods to the client. The client then resold the teas in his upscale store for 10x the amount, no doubt ending up in people’s homes as gifts and told that these are nice aged puerh. My parents sometimes get things like that from friends visiting, and they are almost always very mediocre (or worse) cakes that I wouldn’t even want to try.

So if you visit major Chinese cities and pass by teashops near your hotel and are floored by the crazy pricetags you see, it’s not because the Chinese love their tea so much that prices are insane, but because they need to show the gift-receiver that they paid good money for such things. Skip those stores and head to the wholesale market instead.


Comments

Priced for gifting — 15 Comments

  1. Thanks for clearing this up! (And, yes, I am a longtime reader of yours.)

    It’s nice to be reminded of Veblen, having not read him since college in a distant century. As I remember, Veblen concentrated on the consumers of display/luxury goods rather than the producers, but your post made me wonder about the producers and merchants. It’s a very strange economy in which (up to a point) demand increases as price increases. That said, it should be ridiculously easy to make money serving the needs of these gift buyers. Since that market overlaps with the one in which I buy tea, I wonder if some of that “free money” ends up benefiting those of us who care what the tea tastes like and have learned to avoid some of the most obvious forms of fakery.

    • Well, most of the time these things are priced such that they are obviously not for the dinkers’ market, although that’s not always true.

      • I’m just wondering, how do you define “drinkers’s market” in terms of price ?
        From 0.5 RMB to 199.90 RMB = Drinker’s price? Where to draw the line ?

        • I don’t think price is a good indicator of this – I buy teas that are quite expensive. The key, I think, is that the people are buying for their own consumption and not for the purpose of gifting something expensive.

          • Well , most of us make it for personal consumption and not for gifting , I’ve put that on the table just because it could be confusing for newcomers where is the Bright /Dark Side 🙂
            I’m quite sure a part of your readers not familiar with Chinese gifting habits and whole gifting industry behind of it (include teas).
            Recently I’ve managed to put my hands on few tongs of Hekai Ancient tree cakes, reserved for local bigwigs under the table gifting…not cheap at all as you can imagine.

  2. Makes you wonder… how many cakes of really fantastic tea are just sitting on some CEO’s bookshelf, drying out and going to waste because they’re not even a tea connoisseur? Actually, I don’t even want to think about it. 🙁

  3. “it is important for those in the upper crust to find something that keeps them apart from the rest of the pack – something to distinguish themselves”

    Perhaps they could try good manners, good taste, rejection of vulgarity through ostentation, and understatement as differentiators from the “pack”? 😉

    Toodlepip,

    Hobbes

    • Ah, but all those you list are already part of the dominant class’ tastes imposed on the rest of society to emulate. These values, in and of themselves, have little meaning.

      • I think the key item there is the rejection of vulgarity by avoiding ostentation – the “upper classes” in Mainland China have certainly not learned this lesson, yet. It reminds me of 1980s USA in some ways, or 1970s UK.

        Toodlepip,

        Hobbes

  4. This is what post ’05 Dayi is all about. Except it’s gifting for the not so rich folks.

    It’s also a crucial lens by which we can interpret Tony Chen’s marketing strategy for Sanhetang. Attach to class signals, and situate their products firmly within a distinct and broad aesthetic approach. This, as opposed to BTH, which situates their products around notions of authority. That Vesper Chan knows what he’s doing. That powerful people seek him out for his teas. Some of BTH premium products are distinctly tied to personalities in ways that most brands (Dadugang is the only I can think of otherwise) tend to avoid.

    Flip to the opposite side of the equation–why do you think bad tea get around? People often just want the name of Yiwu, or Lao Ban Zhang, attached to their gift that they use for everyday greasing. Sentiment and display mattered more than any purity or consumption.

    And we haven’t gotten to the part where the story sells the tea!

    • Dadugang is also a failed brand. Nobody serious about tea buys Dadugang.

      Bad tea gets around for all kinds of reasons. The first, and most important I think, is that they are not aware that it’s bad tea.

      Isn’t “this is authentic Lao Banzhang spring first flush” also a story?

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