Why China hasn’t a globally recognised tea brand (yet)

There is a very interesting article in 民营经济报 (Private Economy News) about the state and shortcomings of China’s tea industry. The argument of the article is that China’s tea industry lacks globally recognised trademarks. Despite the fact that China’s tea industry is very old and its production is steadily increasing, China hasn’t produced a big player like Lipton from Great Britain or Tata from India.

What China has in plenty are tea varieties like Longjing or Maofeng. When you buy Longjing, you buy a type of tea, not a brand. There are many Longjing producers with different quality standards. The “fame” of a brand is based on quality standards tested by customers through a long period of time. After that, if you trust a brand, you will look for it. Once you have established your trademark, it becomes much easier to sell your product. Especially in a global economy with language barriers, etc.

China has arguably the longest tea producing history of all countries. Why hasn’t it been able to come up with some well known brands? In my view this has to do with the structure of the Chinese economy and is not unique to its tea industry. China belongs to what Fukuyama calls “low trust countries”. In such countries people tend to not trust strangers and the typical mode of economical association is within the family. Family enterprises have many advantages, but they have difficulties to grow bigger than a certain scale. Because to do that you would need to hire people outside the family. Family enterprises also have difficulties to maintain a quality standard during a long time. Because each generation is not necessarily as gifted as the previous one. To compensate this you would need again to hire outside the family.

Now scale and time are exactly what you need to establish a globally recognised brand. If you don’t have the scale, you don’t have the resources to establish your brand. And if your quality standards don’t last over time, all efforts are lost.

It is not impossible to create global brands in a “low trust society”, but it is harder. It usually needs government leading and intervention to put people together who wouldn’t naturally associate in a business venture. I wouldn’t be surprised if the first Chinese globally recognised tea trademark would be that of state owned enterprise. Or at least one with close links to the state. Future will tell…