The marketing channels of tea in Taiwan.
Wan-Tran Huang I and Wu-Cheng Liao 2
1. Dept. of Marketing, National ChllngHsing University, 250 Kuo-Kuang Rd .. Taichllng City. Taiwan. R.O.C.
2. Dept. of Business Adlninistration. LingTung College, ] Ling-tung Rd .. Taichung City, Taiwan. R.O.C.
Summary
The marketing system of tea in Taiwan had dramatically changed over three hundred
years in terms of tea industry structure and control. There are five development stages.,
I.e .., Part-time tea farming (1697~1864), monopoly export controlled by foreign
marketers (1865~ 1894), Japanese colonial period (r895~1944), export-priority after War
IT (1945---1985), and domestic consumptIon period (1986---). Each stage has different
marketing channels. Nowadays, the direct marketing is a major channel mixed with
sn1all size of tea-processed factories.
In 2000, the production of tea in Taiwan is 20.,349 metric tons., the export quantity only
has 3.,774 metric tons. The import quantity has 12.,891 metric tons. Taiwan is the tea
import area since 1991. The major import items are tea-raw-materials with low price and
tea bags. Per capita consumption of tea in Taiwan is 1.32 kg in 2000. Tea as a beverage is
a Inajor consumption pattern; the other pattern is viewed tea as the favor and hobby
goods.
As for _price discovery for tea in Taiwan, private bargain and tea contest are m~jor
fornls. However, the Rrice discovery has positive relationship with tea quali~. The
factors affecting the changes on marketing channels are tea illdustrial organization,
consumption behaviors, selling places., promotion strategy., the degree of integration with
productIon and marketing, and the roles played by governn1ent.
Keywords
Marketing channel., Tea., Consumer behavior, Export., Imp'ort
Introduction
Tl1e 11istory of production and marketing of tea in Taiwan is over 300 years. The market
share of the value of tea export was above 500/0 with respect to total exports in Taiwan
dllring Japanese colonial period. Tea, sllgar and rice were three major iten1s exported
products at that time. The tea production was decreased in 1940s. This market share was
also decr~ased gradually, resulted from the exportation of non-farm products., although
tea export had been increased since 1951.
Green tea and black tea were major items for tea export. The ratio was from 800/0 in
1970s to 170/0 in 1980s in terms of tea export quantity out of total tea production quantity
because of the factors such as the expansion of non-farm sectors., the growth of national
income., labor shortage in farm sector., and the increasing production costs. To date., the
value of tea export is about 20 million US dollars'l the ratio of t11is value to total
agricultural exports is 0.02%.
Per capita consumption of tea is increasing due to the positive functions viewed by
Taiwanese as a healthy product and the promotion activities taken by government.,
111arketers and producers. The quantities consumed by each consumer are from 0.34 kgs
in 1980 to 1.32 kgs in 2000. ThIs situation resulted fronl the increment of demand for the
ferinented tea, e.g., Oolong tea and Pau Zong tea, in don1estic market. For Recent years.,
one side is the cfiange on production strllctures from the decrease of Northern tea farms
for export market to the increase of Central! Southern tea farms for domestic market~ the
other side is the demand increased in the convenient tea products such as tea bag and tea
beverage.
'fIle 111ain aim of this paper is to give the whole picture of tea market channels in
Taiwan. The next section presents the trends of tea production and tea consumption. The
third section involves with the dramatic changes on tea marketing channels., followed by
SOine scenarios about the export and ilnport of tea and by some factors affecting the
changes on tea marketing channels. The paper ellds with concluding remarks.
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Session N
Trends in Production and Consumption
The tea production is showed in Table 1. The tea production has been declined
whether in planted area or in production quantity since mid-1960s. The peak period of
tea productIon wa~ in 1960s and in 1970s. For Instance, the planted area was over 34
thousand hectares and the production was above 26 thousand metric tons in 1971.
After this year., the productIon of tea revealed the decreasing trel1d gradually until in
1990s., keeping the yearly production between 20 and 25 thousand metric tons. In
2000., Taiwan had tea planted area, 19.,701 hectors., and tea production, 20,349 metric
tons., respectively. .
. The reasons of reduction with tea production are such as trade off between export and
import for tea, and the changes on production structures in terms of production zones.
It IS worthy to note that the yield of tea production keeps around 1100 kg/ha in 1990s
due to the Improvement of tea varieties and tea farming management.
As for tea consumption, there is an increasing trend but consumption pattern
continues to change. Per capita consumption had been over one kg since 1991. In
2000., this quantity is 1.32 kgs. The consumption pattern happened to change each
decade. DurIng 1970s, Taiwan people did not take much tea because of exporting most
of tea productIon. In 1980s., drInking tea is to combine the habits of consumption with
leisure., tea bags and tea beverage were the major items, while viewing tea as a healthy
product is a fashionable product during 1990s.
Some factors are given rise to have an increasing Table I The Area and Production of Tea in Taiwan
trend of tea consumption. Fist of all is the tea taste
Planted area
Yield Total Production
(Hectare)
(Kg/ha.) (Metric tons)
·
b
or ~ea preference b elng th e prIor reason to. uy tea.
]953
44.655
276
] 1.903
TaIwan consumers gIve some more weIghts on ]954
46.186
282
13,007
both tea taste and high guality when they purchase ]955
47.000
3]2
14.680
various tea products. Secondly, tea products are 1961
47.632
402
18.064
toward the diversification. There are many kinds
1966
37,420
623
2].5] 0
of tea product in terms of tea varieties, fermented
197]
34.312
819
26.984
methods and packing patterns. For example, to
]976
32.254
825
24,758
view tea as a beverage sucl1 as the canned Oolong 1986
]981
29,]02
931
25.223
26,389
988
23.890
tea is popular to the young generation. The values ]991
23.864
956
21,380
of this canned beverage vIewed from retail market 1996' 21,223
1,159
23.131
level are about 326 million US dollars in 2000.
1997
2 L 199
L 198
23.505
]998
20,659
1,173
22,641
Dramatic Changes on Tea Marketing
1999
20,222
1.103
21.119
Channels
.
2000
19.701
1,099
20,349
The marketing system of tea in Taiwan had Source: A~ricu~tural Statis~ics Yearbook, Council
dramatically changed over three hundred years
- of Agrlcu]ture. Taiwan
.with respect to tea industry and control. There are five d.evelopment stages., i.e..,
Part-time tea farming (1697---1864), monoQoly ex~ort c.ontrolled by foreign marketers
(1865--- 1894~ Japanese colonial period (1895---1944)., export-priority after War II
1(1945---1985 , and domestic consumption period (1986"'~). Each stage has different
-marketing c annels. The following is to introduce the marketing chanllels of the last
two periods.
Export-Priority Period (1945r--.J1985)
The marketing channels of tea during this period are showed as Figure 1. The
marketing channel for export market is the path of Tea farmers~Fresh-made tea firms
~ Refinea-made tea firms~Export. The marketing channel for domestic market is the
path of Tea farmers~Fresh-madetea firnls~Refined-madeTea firms~Specializedtea
sellers~Consumers. There are some features of marketing chalmels in this period.
Most of tea products whether product types had been exported. Tea-manufactured
factories of traders were the majority of exporters while few foreign tea companies still
run export business.
------..,
Fresh
Tealeaflet
Fresh-
made
Tea
Finns
Figure I
Session N
----.
The Marketing Channels of Tea in
Taiwan (1945-1986)
Consumers
-60-
Domestic Consumption Period (1986 until now)
Figure 2 shows the marketing channels of tea after 1987. Tl1e quantities consumed by
domestic market were beyond- those quantities for export markets in 1986 because of
unstable export and inclined to consume tea for Taiwan people.
During this period, the export quantities were sUQplied by Northern tea farms, the
path for export was controlled by big-size-tea-manutactured firms which process fresh
tea leaf-let Into fresh-made tea, and then pass to refined-made tea firms for export, only
few for domestic markets. The quantitIes, consumed by domestic consumers, were
supplied by Central/ Southern tea farms. Nowadays, the major marketing channel for
domestic markets is the direct marketing mixed with small size of tea-processed
factories. This paper points out that these factories not only produce fresh tea leaf-let,
but also do process tea and sell various tea products themselves.
Freshmade
Tea
Finns
Freshmade
Tea
Refined-made
Tea Finns
Special ized Tea Sellers
Tea Shops
Retailers
Others
Figure 2
The Marketing Cllilnnels of Tea in Taiwan ( 1986-)
The Import and Export of Tea
Only few quantities were imported between 1960s and 1970s, but the imported
quantities 11ad huge increase after early 1980s, e.g., 2604 metric tons in 1986 and
12891 metric tons in 2000, as showed in Table 2. Some 70%) of the imported tea
leaf-let was used as to process the black tea, supplying to the processed firms for
making tea beverage whIle the rest of quantities imported was llsed for flower tea or
Golong tea. The imported tea came mainly from South-East Asia countries, especially
from Vietnam from 44.3% in 1992 to 80.20/0 in 2000 in terlTIS of total imported
quantities.
Table 2 The Import and Export of Tea in Taiwan
The first historical record of tea
1m p·o~te(T"tf(;i~·_-··-···-·-·~E-x port
E~ported to·"
IJnport
export in Taiwan was in 1865 and
Quantities
Vietnam
Quantities
Japan
its quantities exported were
( Metric tons) (Metric tons) ( Metric tons) (Metric tons)
82,022 kgs. As mentioned before,
14,603
1961
309
188
the tea. export played the very
19,645
1966
420
irnportant role to Taiwan's
22,955
1971
531
economy during Japanese colonial
21,115
1976
1,037
o
8.056
period. The ratio of quantities
198]
1,525
4,467
15,516
o
9,650
1986
2,604
176
6.258
exported to total production was
1,679
4,040
1991
6,045
5,696
over 85% from 1953 to 1976. This
2,993
4,328
1992
6,752
5,577
ratio from 61.5% in 1981 declined
4,229
1993
10,237
5,606
4.223
to 18.5% in 2000, the exported
5,450
1994
10,685
4.948
3.322
quantities were 15,516 metrIC tons
1995
8,354
5,666
4,150
2.244
1996
7,654
5, 538
6,311
2,184
and
3,774
metric
tons,
1997
7,924
6,188
7,145
4.086
respectively. The major export
6,925
1998
9,034
3,188
1,244
n1arket for tea is Japan., but the
8, 745
1999
11,302
3,539
1.541
quantities -exported also revealed
2000
12,891
10,333
3,774
1,578
the decreasing trend from 8,056 . ·..· · ·. S()"li·r·ce·:.. .j\"s..·Tabi"e···r··..·
metric tons in 1976 to 1,578
metric tons in 2000. To date, the tea export has the problems of the concentration of
export market on Japan and the decreasillg export quantities.
Factors Influencing on the Changes of Marketing Channels
As mentioned above, the tea marketing channels have showed some dramatic
changes so as to have five development phases. The following gives some major
factors inducing to these changes.
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Session IV
Consumer behavior --- The eonsun1er orientation is a key rule to affect marketing
activities whether in domestic market or in foreign market. After early 1990s, the market
for Taiwan tea switched from foreign market to domestic market. The tea producers and I
or marketers change some kinds or types of tea product in order to cOIncide with the
changes on consumer preference with tea, given that consumers in Taiwan not only have
higher income but also rethink the importance of tea consumj)tion for their health or
some special taste.
Industrial organization --- This organizati~n has twC? different aspect~. One. side is,
supported by government to set up Tea SellIng Agent In JapaneSe colonIal perIod and
Taiwan Tea Company in 1940s and 1950s, respecitively. These organizations had some
functions of enhancing tea selling and promoting tea quality through the relevant
government regulations. The other side is the formulatIon of tea farmers' groups,
especially since 1980s, e.g., tea farmers organized some production and lor marketIng
cooperatIves devoting to Improving tea farn1ing management skill and promoting tea
consumption.
Government Roles --- Many activities taken by government are involving with tea
rproduction and marketing except for government regulations. With resl?ect of tea
production, government help tea farmers set up the factory-processed tea JOIntly and to
organize some tea farmers' groups. As for marketing activities, government assists tea
'farmers via some finance aids to hold tea festIval., tea contest, tea promotion,
!improvement of tea package, and tourist farm.
i
Price discovery methods --- Private bargain and tea contest are major approaches.
i
'However, 'these approaches of price discovery have positive relationships with tea
'quality. What place to sell the tea is the factor involving with price discovery. As
n1entioned that current tea marketing channels are complicated, tea markets in domestic
seem to be chaos. The patterns of the large scale of tea contest in winter season and small
sizes of tea shows not only are the. forms of price discovery but also the part of
marketing or selling places.
i
Promotion strategies --- There are many promotion strategies adopted by government
and I or tea farmers (or groups). It has the relationship between these strategies and
marketing channels. For example, the mass communications,as TV ads, seem to give the
strength forming the direct ~arketing channel for tea bags and/ or tea beverage.
Concluding Remarks
, Tea is now very important for Taiwa11 consumers' -daily life with respect of traditional
tea culture, healthy product, and fashionable beverage although the quantity of tea
production reveals the declined trend. This is also the reason why per capita
Iconsumption of tea in Taiwan is stably increasing and the quantities imported for tea are
Imore than those of export. The tea marketing channels in Taiwan also happened to have
some various patterns' dlle to these changes. To date, the tea marketing channels are
quietly complex. There are different channels for domestic markets and foreign markets
but the direct marketing is now a major channel mixed with small size of tea-processed
factories.
Based on the changes of the marketing channel of tea in Taiwan, this paper finds many
factors inducing to these changes. The factors are consumption behaviors, tea industrial
organization, the places of price discovery, promotion strategies, the degree of
integration with production and marketing, and the roles played by government.
Currently, there are some problems faced by tea producers, marketers and government
in terms of upgrading smoothly the tea marketing channels. First question is how to set
up the systen1 of grade and standard for various tea products. There are more than 8000
firms and/ or factories to produce and process tea, resulted in brand diversification of tea
products. Secondly conSllmers are hard to find· the balance of prices they pay and tea
quality. Hence, how to make the systen1 of price discovery work well is the key point to
~let consumers have confidence in buying what tl1ey prefer. Finally, it seems to be sure
ithat Taiwan will be the member of WTO next month. Tea producers and lor marketers
must face the problem of market access. By WTO's measure Taiwan will not only
import tea more than now but also induce to adjust the functions of marketers in various
111arketing channels of tea in Taiwan.
'I
Session N
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