Not paying the resale premium

Puerh is different from most teas in a number of ways, but one of the traits that it shares less with tea (other than liu’an) and more with wine is that puerh holds resale value, at least in the compressed form. When you have a cake of puerh, you can resell the tea to someone else quite easily, and if you have held it for a while and the cake is famous, the cake can resell for quite a premium. I was talking to some friends last weekend about tea while we were drinking together at a local teahouse, and they mentioned that they bought some Yellow Labels back in the day (about 10+ years ago) for 500 HKD a piece. That tea is now easily 20k HKD depending on the condition of the cake, so it’s quite a markup over the years. While they may not be able to fetch that kind of price, it is quite safe to say that someone who bought tea twenty or even ten years ago would’ve made a lot of money keeping it.

This is drastically different from most teas, which, upon being sold, holds little value. Sure, you can resell 200g of whatever oolong you bought from some online shop probably for little loss if you grew to dislike the tea or simply want something else. Try doing that with 2kg, or 20kg, however, and you’re in real trouble – it’s no longer feasible, and chances are nobody will take it off your hands without a substantial discount. With puerh, that illiquidity haircut is much lower than that of other teas.

This also means that when you buy a cake of puerh, you’re also paying the premium that comes with the liquidity of the underlying asset – the tea itself. When you spend 15k HKD to buy a cake of Zhenchunya, for example, you know that you can quite easily resell the tea to someone else for pretty much the same price. This is also one of the reasons, I think, why teas from Dayi tend to trade at a premium to other factories. Of course, with Dayi tea we more or less know what we’re getting, and there’s definitely a “trust” factor involved here. However, there is also the case that Dayi teas are among the most liquid of puerh teas on the market today, which therefore commands higher prices. This is why there’s the very strange phenomenon, observed by friends in the mainland who deal tea, where one jian of Dayi tea costs more than 42 loose cakes (Dayi jians are all 6 tongs now) of the exact same thing – the jian is more valuable because 1) the packaging of the whole jian gives it one extra layer of anti-counterfeit measure and 2) the jian is the basic unit of trade for tea traders, whereas once you’ve broken up the jian you have to sell it retail, and there just isn’t all that much demand, retail, for this sort of tea.

So when you buy an aged cake, one of the things you’re paying for is this resale premium. You are, in other words, paying for the ability to sell it at a later date. What if you can strip this value away and not pay for it?

Well, there are ways, one of which is to buy broken up pieces of cakes, which are always substantially cheaper than the whole cake itself. Some of these, when you can find them here anyway, are quite tasty and well worth the value. Another option is to buy cakes that are damaged in some ways so that they are no longer sellable in the same way a whole cake with original wrapper, etc, can be sold. Some of these were used as samples. Others were just damaged. Still others… who knows. For the end user of tea – drinkers like you and me – this is something that matters very little.

One of the cakes I acquired recently is in this vein – cheap (relatively speaking) aged tea because it has no wrapper, lost a decent amount of tea (it’s about 300g instead of 357g) and just generally not very appealing looking. It doesn’t mean it isn’t aged, and it isn’t tasty – it’s just no good as something to be sold to someone else, so the only people who’re going to be willing to buy them are people like me – drinkers.

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You can see this is typical Menghai factory stuff (the neifei is “submarine” i.e. under the surface of the cake) with a layer of finer leaves on the face of the cake, and on the back (and inside) rather big leaves. The tea is not particularly great or anything, but it is superior to many of the loose, broken pieces that you can find, which tend to be a little lower in quality. Also, this being a whole cake, it provides a nice reference point for the age and the type. The seller claims this is about 20 years old or thereabouts. The information is, at best, sketchy. The tea has been through some traditional storage, but that was definitely a while back, and the time spent on the shelf of the seller’s store has made it rather mellow.

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With teas like this, is there any reason to pay full price just to get a wrapper?


Comments

Not paying the resale premium — 12 Comments

  1. No, there is no reason, unless one wants to invest money. Or unless he drinks the wrapping/story/factory name (which many people do).

    To the resale of non-puerh tea – well, one of the most succesful vendors here has an exclusive pact with Jing tea shop, reselling their teas at more than 200% of the RETAIL price in Jing tea shop. Of course, there are some fees to bring it here, but I do not think that the vendor would buy the tea at retail price. This huge resale premium is, I guess, protected only by the exclusive pact, so no one from Czech Republic may buy directly from Jing Tea Shop (only teas not offered by the local vendor). Outrageous? In my opinion, definitely yes. But it works for him.

    Jakub

    • I didn’t get it. Does it mean if a Czech resident places an order with Jing, the shop would say, “no, go to your local retailer”? The Czech retailer has got to be super powerful to put Jing Tea Shop into such an obligation. Besides, I know Czech is a fast growing market for fine tea. It seems better off for Jing to sell directly to buyers there instead of refusing to do it. Or is it because there are some constant customs issue in Czech so that Jing would rather have a local agent instead of sending numerous packages there?

      • Hi,
        yes, I don’t understand it either, but it is just as you describe it 🙂

        No, there is no real problem with customs here (when small packages are sent, they don’t go through customs office at all).
        Jakub

  2. This really sheds light on the number of people who are interested in puerh for investing or just a status symbol to put on their shelf rather than for drinking and appreciating. Works out great for you and any tea drinkers with access to these “damaged” cakes though. Enjoy!

    • Yeah, well, there are plenty of people who base their purchase decision on how much money they’ll make on paper.

  3. My apologies, I thought I’d make a response here to Jakub Tomek’s latest blog post since the captcha does not seem to work for anon responses…

    My perspective…

    Look for strength of character, not any general focus on strength as a broad question. Young mild tea of strong character turns into old mild tea of strong character. Given my recent experience with the Yangqinghao ’04 and the fact I could check many people’s impressions since ’06, I judge that it has had a reasonably successful aging so far, in some ways better than what I’ve read about the ’99 BGT in 2006 reviews. It’s certainly better than some of the lesser Changtai products of ’99. Massively superior to the Zhou Yu product from ’03, even though that one has bitterness, unlike the YQH, which was never bitter, and always subtle. It’s why you really can only know about tea a few years down the road. Is that bitterness moderating? Is the tea fading? So forth and on. Of course, my chief weakness in evaluating these teas is that I have had very few teas from that time, and even fewer that were any good. I’d love to compare with the ’03 Chen Yuan Hao, which people still seems to like as well.

    As far as redness is concerned…Red tea is typically not nasty. If it’s really badly process and very yesheng, then it may have some sourness. The issue with red tea puerh is that the flavor is relatively flat, and much of the energy gone as well, as time goes on. The lack of energy does tend to come from too much oxidation. Go to sampletea.com and try the Dayi Bada High Mountain, and see if you don’t find some fairly similar things to compare with your previous experiences. Same with the 2001 Menghai Dayi One Leaf. Hongchapu do make very pleasant drinks, but people usually ask for far too much, as if it were aged puerh. Which it is, but not as much as it needs to be. If you want hongcha, buy hongcha. A good one from where-ever is just going to be much nicer than any incidentally fermented puerh.

    This doesn’t mean I’m all fired up for completely raw puerh. Having tea that’s nice to drink now, while still retaining aging capability is a plus, and I don’t think, given what was probably very loose control over the process in earlier days, that it hurts future quality much. More control over the process means better results over the life-cycle of the product.

    I think many people who frequent Jakub Tomek’s site would enjoy this manga…

    http://www.mangareader.net/suugaku-girl

    For those of you with an interest in other fine collectable beverages…

    http://ftalphaville.ft.com/blog/2012/05/18/992851/is-the-lafite-bubble-about-to-pop/

    –shah8

  4. Tea goes first of course, but some wrapers are very nice to look at. So nice that one have to have them:)…When you buy cakes without wrapers, are those originaly stored like that? I mean, naked in tongs/jians? Or they just have lost their wrapping during years (storage+reselling…)

    Thanks
    Petr

    • Well, in the old days, sometimes they store the cakes naked and then re-wrap the tea when they sell it, so the wrapper you see might not even be the original. That’s not done so much anymore, but it’s definitely true back in the day

  5. nice post again!

    i was offered a lot of those teas by a friend in hong kong… i never bought one because at first i was skeptic… but i guess the real thing about these kinds of tea is that you have to try before you buy… and just gauge the amount you are willing to pay for what you tasted… which is i think a better way to buy tea vs buying tea by looking at the wrapper

    -darwin

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